IoT in Finance & Banking Industries

The rapid digitization of the Banking and Finance sectors has caused a surge in the number of users who maintain a Smartphone whether to manage their Bank Accounts, purchase and manage Credit or Debit Cards, shopping, food ordering, E-commerce and so on. The common factor in every industry is the payment aspect. In today’s modern world, activities such as checking the Account Balance, purchase a New Credit Card, Send and Receive Money which usually needed us to visit a nearby Bank or ATM Machine are now available at our Fingertips due to the digitization of the entire finance industry. In this blog, let’s look at how IoT-connected devices and sensors play a key role in enhancing the Digital Finance & Banking sectors.

To tap on to the benefits of IoT, data collection at source plays a key role. Once the data is collected, it can be analyzed, transformed, and can be used to derive patterns, take crucial decisions using statistical analysis or AI / ML Algorithms.

• Smartphones & Mobile Apps: Banks have migrated to a fully functioning Mobile App and encourage their Account holders to use the Mobile App as much as possible rather than using the Bank Web services online. This is primarily due to the analytical frameworks attached to the Mobile App. Such Apps can observe the user behavior in terms of payment transactions carried out, user interaction with other apps to create payment transactions such as Apparel shopping, Food ordering, E-Commerce, Digital Payments, Investments, and Trading. This data provides a rich insight into the user’s spending pattern which the Banks can leverage to make changes or introduce new schemes and features in the Market.
• Wearables & wireless Payment devices: Wearables and NFC devices used for digital payments provide demographic data along with user spending activities which can be used by the Banks to introduce tailored reward programs to the user. Example: A user purchasing apparel at a shopping mall might be rewarded with shopping points or the Banks can partner with vendors in the shopping mall to invite more such customers. Deals and Cashbacks can be offered for specific Vendors and apparel which will entice customers to shop more from that Vendor.
• Digital Sensors: Sensors can be placed in the Physical units of Bank Branche machines, ATM Kiosks to analyze consumer behavior. These sensors can also report any unexpected machine failures, unexpected customer problems, service issues or ATM failures. Sensors can also ensure transactions such as debit and withdrawal in the bank happens in an orderly manner.

• Fraud Prevention: Detection of fraudulent transactions are of primary importance to financial institutions that are constantly investing to prevent misuse of their offerings. Today all the Payment Processors such as MasterCard, VISA and Bank and financial institutions employ AI-based Fraud Prevention which tracks a user’s behaviour and transaction behaviour to accurately identify if a transaction is fraudulent or not. Companies like Sift and ClearSale employ AI models that detect and predict fraud transactions without hampering the customer experience.
• Debt Collection: Collection of debt from individual and enterprise defaulters involves considerable effort, overhead costs and management for the Lending banks and institutions. With IoT Sensors in Bank Machines, ATMs and Mobile apps tracking User’s activity, it is possible to first assess the supply chain activity on the debtor side and Financial institutions can determine their readiness to pay without excessive overhead costs. Similarly, by Tracking User behaviour Banks can determine whether to offer loans to an individual based on his payback readiness and entice customers with advance loans having relaxed interest and payment terms only to the deserving customers.

• Capacity Management: Banks constantly aim to expand the network of ATMs and offices while also maintaining existing units. Using IoT-enabled sensors and gathering data of existing bank units, customer visits and transactions per day, Bank authorities can take a decision to expand by hiring new personnel or to shift existing personnel to new offices for better distribution of customers across locations.
• Tailored Marketing and Rewards: Banks regularly track and collect information on user behavior in debit/credit card transactions, digital payments, cheque payments. This data can be used to incentivize customers by introducing tailored offers and rewards for a group of customers.For example: frequently shopping customers can be given Flat Discounts or reward points which can be redeemed at shopping and Apparel stores. Frequently food ordering customers can be provided with Vouchers and Cashback offers on Food Delivery Apps. Digital Payments such as UPI customers can be rewarded with Cashbacks to entice them to use the platform more frequently to increase transactions. This improves customer engagement and loyalty towards the Banks.
• Decentralized secure Transactions: By combining IoT & Blockchain, the Bank nodes which are responsible for payment processing and reconciliation can be decentralized to provide maximum security. Decentralized ledgers offer the best security against Hacking and Fraud Transactions as a copy of the ledger data is present with all participating nodes making the transactions immutable. Combining this with IoT sensors, the supply chain industry and Banks can make quick and secure transactions among themselves. Decentralization also helps in completing large volumes of transactions securely. Reconciliation happens immediately following the blockchain transaction when compared to traditional reconciliation jobs happening at EOD. This reduces the overall cost and time involved and improves the overall efficiency of the payment system.

IoT complements the digitization of the Finance and Banking sectors by adding an extra layer of Security and Speed in processing volumes of transactions. Banks and financial institutions of the modern world also capture various data from the user using Smartphone Apps, Wearables and Physical Sensors in Bank Offices and ATMs which assist in the expansion of the Bank network, implementing new features and introducing new features and creates new partnership opportunities with other companies amplifying the overall growth of the financial system and economy.