Financial services and banking were previously projected to less likely rely on IoT-empowered advancements since this industry is prone to bureaucracy. Having said that, several newcomer banks and FinTech startups are paving the way for IoT innovations nowadays.

The Internet of Things (IoT) generally improves banking access, wealth management, asset monitoring, real-time data gathering, and so much more. But are IoT absolutely worthwhile?  Here’s an in-depth rundown of IoT intangible benefits in the financial services and banking sector at the present time and in the near future.

Payment through Things

Automated payments are now made not only via smartphones but through wearable devices too, thanks to the integration of IoT and payment functionality. Sure, IoT raises certain security issues, but preventive measures can successfully hinder risks if done right.

In the future, there might be more gadgets that can process payments in real-time and on a marginal cost basis. By then, clients may possibly ask ‘what is a direct deposit payment’ since it can be foreseen that all payments will be electronically sent or received soon. Now, people are making direct deposit, yet they’re less likely going to use the term.

Wallet on Things

Imagine an autonomous e-car with its on e-wallet. You don’t have to personally pay for maintenance services, parking fees, or car insurance because your vehicle itself can do financing on its own. How’s that?

This concept is actually happening right now, but not yet on transportation. Many “smart” home appliances or consumer equipment are now capable of taking care of its running expenses on its own with its pre-funded wallet.

Improved Branch Banking Efficiency

IoT has been putting the modern-day branch system in jeopardy through mobile banking and smart banks. On the customer’s side, mobile banking is, without a doubt, pretty convenient. People don’t have to indulge in the hustle and bustle of the city life just to pay bills or deposit cash.

Smart banks are banks where no human employees are present. People have to go in these kiosks like how we go to ATMs, of course, but they’re typically more convenient than waiting for your turn in a bank transaction. Plus, smart banks benefit bank companies in regards to maintenance costs and a better communication system between branches.

IoT-assisted Smart Payment Contracts

If there are smart banks, how about smart payment contracts? Even without people, these smart contracts can still verify and facilitate the negotiation of a contract. Clients can have payment options like self-enforcing and partially/fully self-executing.

Smart contracts, together with digital identity and IoT, can potentially mitigate operational risks, hold advanced automation processes, as well as offer better customer experience.

Frictionless Customer Onboarding

One concern that every bank faces is knowing their customers’ financial behavior. Fortunately, blockchain-based unique digital signature is getting its spotlight. Banks can now improve their KYC (know-your-customer) process and effective product cross-selling to capable clients.

For example, if a bank notices that a client frequently goes to a specific gas station, the bank then can offer him/her with a co-branded credit card (best with rewards), generating a frictionless customer onboarding.

Seamless Communication Between Things

D2D (device-to-device) communication improves financing to the next level, allowing people to generate loan communities and make shared investments. For instance, online banking allows automated cashless payments. Also, as mentioned earlier, insurance underwriting provides curated financial advice based on a client’s spending habits.

Automated Leasing Finance

In addition to IoT devices’ fine-grained tracking, real-time monitoring of metrics (e.g., inevitable damages and asset usage, and idle time) is crucial for the pricing of leased assets.

Any factor related to leasing can now be automated and simplified, making everything as digitally enabled assets. The bank is of great advantage here. If a contract is going to be terminated or default, the bank can remotely and efficiently lock or disable the leased asset.

Credit Risk Assessment

Radio-frequency identification (RFID) has been improving the trade finance domain and asset management companies.

Take temperature-sensitive goods that are prone to shipping risks as an example. These risks can be mitigated with RFID-equipped IoT devices that send alerts every time the parameters being monitored will go out of bounds. This sensor implementation provides fine-grained tracking and real-time data for credit risk assessment.

Advanced PFM tools

Gone are the days when clients would search for “finance management with people like me” benchmarks. Today’s IoT-related Personal Financial Management (PFM) tools can now be contextualized based on real-time data.

Internet consumption, for instance, can now be capped, depending on a user’s pre-defined amount. These tools (not the user) manage service consumption and control operating expenses on their own (better than the user), which is another way to mitigate financial risks.

Takeaway

More efficient risk management, enhanced data gathering, augmented storage algorithms, and client-friendly financial management gadgets are some of the many benefits of IoT to financial services and the banking industry.

In the said domains, a systematic approach in utilizing IoT products is your key to success. It’s always better to start identifying issues before determining effective (and cost-efficient, if possible) IoT solution resolutions for them