IoT for Smart Banks and Finance
The Internet of Things (IoT) is a cutting-edge technology that enables networks of connected devices (e.g., sensors, cameras, smart gadgets) to collect real-time data, transmit it to the cloud for processing and analysis, and respond to events in real time. IoT plays a vital role in the banking and financial sector by enabling efficient data collection and processing and supporting digital automation of key processes. With IoT-based solutions, BFSI companies can optimize their services and operations, enhance transaction security, and deliver a modern level of customer service.
What are the benefits of IoT for banking and finance?
Improved customer insight and personalized customer experience. IoT solutions collect and process customer data (regular payment locations, consumer preferences, driving behavior, etc.), helping BFSI companies learn more about their customers and identify their needs and risks. With detailed and up-to-date customer profiles, BFSI companies can personalize interactions, offer targeted services, and provide necessary financial assistance.
Automation. IoT-based systems can automatically perform certain operations: process applications, open bank accounts, disable credit cards, etc., minimizing human intervention and thus human error.
Enhanced security. IoT allows connecting and remotely managing surveillance cameras, smart alarm systems, vehicle telematics, and other monitoring technologies, providing round-the-clock protection for property and equipment (offices, ATMs, CIT vehicles, etc.) and sending alarm signals in case of malicious actions. IoT is also a driver of cybersecurity: wearable devices enable user authentication via fingerprints, retinal scans, or facial recognition when making payments through mobile apps.
Fraud detection. IoT combined with AI-based analytics helps detect fraud and hacking attempts by collecting and analyzing user account data. When suspicious activity is detected, the user can be promptly alerted and their account temporarily disabled.
Tap-and-go payments. By integrating banking IoT solutions with wearable devices, users can make payments without using credit or debit cards. NFC-enabled devices such as smartphones and smartwatches allow contactless payments for seamless financial transactions.
IoT applications for smart banks and finance
Smart branch. IoT solutions for smart branches optimize customer interactions by tracking queues and informing customers about wait times or directing them to an available counter. Smart branches can share user data to improve workflows and minimize staff involvement. For example, the London branch of Virgin Money Studio B uses Amazon Alexa voice assistant, allowing customers to ask simple financial questions using voice recognition technology. The branch is also equipped with facial recognition to track customer interactions with the space.
ATMs. Data streaming using IoT helps banks monitor customer activity, identify ATM usage patterns, and make decisions about placing ATMs based on demand. Data on ATM operating conditions (indoor temperature, lighting, motion, etc.) from IoT sensors is essential for switching to energy-saving modes: adjusting HVAC and lighting based on ATM traffic reduces energy consumption. By providing real-time monitoring of ATM functionality and cash levels, IoT solutions also help combat incidents such as skimming devices, card reader malfunctions, cash shortages, etc. IoT can also enhance credit card usability at ATMs: US bank Citibank authenticates its customers and enables cardless entry into its IoT-enabled ATM lobbies during non-business hours using wearable devices with Bluetooth beacons (e.g., smartphones).
Trade finance. For banks involved in trade finance, IoT provides visibility into the physical flows they finance and enables decision-making based on real-time information. Data obtained through IoT helps banks better assess risks throughout the transaction lifecycle, allocate funds more efficiently, and expand financing strategies. For example, Austria’s Erste Group Bank AG offers advanced inventory financing to its large corporate clients using IoT. Data from monitoring goods movement via IoT sensors increases asset visibility and security, and promptly reflects assets on Erste clients’ balance sheets.
Insurance. IoT devices monitor the condition of insured assets and alert insurers to any anomalies so they can intervene and take necessary measures to reduce risks. Insurers also use IoT-generated data for a preventive approach and incident prediction. For instance, an insurer may detect an asset breakdown and warn the policyholder before damage occurs. This approach reduces claims and helps prevent insurance fraud.
A more specific example is usage-based insurance, which is being actively implemented by auto insurance providers worldwide. Combining IoT and telematics (GPS tracking, onboard vehicle diagnostics) allows insurers to collect data on vehicle condition and driver behavior to offer personalized insurance plans. For instance, US auto insurer Progressive launched a telematics-based auto insurance program called Snapshot. Telematics devices transmit personalized driving data to the insurer, and safe driving is rewarded with lower premiums.
Another interesting example is the ColdCover analytics program by Parsyl Inc. — a perishable cargo insurance package that uses IoT sensors and analytics to track shipments in real time, monitor temperature fluctuations in containers, assess risks, and send alerts in case of temperature violations and cargo spoilage anywhere in the supply chain. With enhanced visibility and analytics, Parsyl can investigate claims and make payouts to shippers within 72 hours.
Accounting and auditing. Connecting clients’ payment systems and CPA software via IoT enables fast and secure data exchange and facilitates automation of routine accounting processes such as data entry, reconciliation, invoicing, etc. With IoT, accountants can track financial data in real time and gain an accurate view of company operations to perform advisory functions more effectively. IoT also contributes to auditing by increasing transparency and automation: Accountants can monitor transactions and audit records on the fly to quickly identify data discrepancies and prevent fraud.
Banks and finance on the path to technological progress
IoT offers a range of digitalization benefits for BFSI: from a 360-degree customer view to enhanced financial security, fraud detection, advanced insurance strategies, and more. IoT technologies help banking and financial companies meet customer expectations and improve service quality.