Can financial services benefit from the Internet of Things? Absolutely and to the fullest extent. Not only to collect more and better asset data, the IoT is also changing the way we access banking and manage wealth, invest and monitor assets. Let's see how the IoT changes banks and financial technology companies.
To improve efficiency and customer service, banks are investing enthusiastically in the Internet of Things. The technology has great potential and a wide range of uses.
How to make sure your financial company makes the best use of this technology? What are the benefits of implementing the IoT? What does it take to build an IoT project? We will expose and explain all the above in this article.
- The state of the financial IoT
- Benefits of IoT in finance
- IoT financial adoption process
- FinTech IoT Applications
- Cost of developing FinTech IoT tools
The state of the financial IoT
First, the Internet of Things makes more data available to businesses. And, of course, being able to gather information in real time is crucial for the banking sector. For example, managers can predict market fluctuations and proactively solve problems.
The Internet of Things financial is booming, and here are the statistics to prove it:
- The rate of adoption of the IoT financial is 64% worldwide. Bank customers like IoT solutions because of reduced transaction fees. The IoT directly connects a company to a bank, so it's not necessary to use the Visa and MasterCard gateways. Both are known for high credit card processing fees, ranging from 1.9% to 2.5% per transaction.
- The connected devices are on the boom – according to Statista, there will be more than 75 billion such from here 2025.
- It is estimated that the global economic benefits of the Internet of Things in finance will reach $ 2 trillion by the year 2020.
The growth rate of the financial IoT market is impressive. However, some banking companies do not implement IoT innovations or apply them on a small scale. They do not rethink or improve their business processes.
Benefits of IoT in finance
Before studying and applying IoT in fintech and banking, company executives need to understand the benefits of technology. Here are the main reasons for the adoption of IoT in Fintech:
- Customized customer service. Banking providers can use IoT to collect more data about their customers. After collecting real-time information about customer needs and interests, businesses can offer personalized content and personalized experience. As a result, businesses connect to and benefit from their audiences in many ways.
- Improved decision making. The IoT helps companies obtain data for credit risk assessment. With D2D (device-to-device) communication protocols and sensor implementations, asset management companies can obtain relevant data in other areas such as retail, agriculture, and more.
- Real-time data collection. Meeting the needs of customers with IoT tools is more comfortable and faster, thanks to continuous data collection. For example, in insurance, a provider can provide real-time access to a case database. In the banking sector, a customer can monitor online the lines at the branch or schedule a cash withdrawal and perform the deed at the nearest ATM.
- Smart interactions. With IoT, financial institutions are getting more involved in the daily routine of their clients. For example, to help track expenses, customers connect the banking tool to their smart devices. In addition, they can set a limit and block the account if it is exceeded.
- Transparent communication between financial devices. Peripheral communication has a wide range of applications. First, the IoT in banks allows automated cashless payments. Second, underwriting insurance provides clients with sound financial advice based on their consumption habits. That said, people can form loan communities to lend themselves to money and make shared investments.
IoT financial adoption process
To design a solution using the Internet of Things, a financial sector company must define the development time. Business leaders estimate the number of people to be involved and the budget needed to carry out all stages of the project. Here's a step-by-step overview of the IoT adoption process:
Validation of the concept
First and foremost, a business leader needs to research the market and ensure that the product will contribute to revenue and exposure growth. Whether the new product is for the sale or streamlining of business processes, take the time to study similar innovations and analyze their impact on creative businesses.
Describe the future tool
Then comes prototyping – deciding how to treat applications to the public. What hardware and software tools to choose for development? What technical skills will a company need to create a product in its own right?
The project team decides what data a tool will collect and how it will handle it. This issue has become even more pressing since the creation of the GDPR. In general, you must limit the data to a set that is essential for the functionality of your product. So set the data processing and storage requirements in the stone. And, in case of inspections, keep written directions in an accessible place.
Most IoT solutions are based on hardware – sensors, BLE tags, wearablesetc. Choosing equipment is a challenge because it must be affordable and marketable. The team must choose the main technology before writing the corresponding software.
The IoT software has a multilayered backend. Usually, developers must integrate cloud architecture, communication protocols, data collection and analysis algorithms, APIs, and so on. Depending on the technology chosen, additional software components may be added to the list.
L & # 39; Integration
To ensure that the new product integrates seamlessly with other tools used by banking staff, developers integrate it with third-party solutions (for example, G Suite). In addition, integrations with third-party solutions, such as widely used services, clients, and utilities, make a product more convenient and user-oriented.
When the code is written, the project team tests the features, work, and product safety. During the test phase, a series of cases is written to ensure that the product fulfills its purpose.
After the product release, you should regularly review and comment on the comments. When you add new features, test the tool again to avoid technical debt.
FinTech IoT Applications
As financial institutions become more aware of the power of IoT, more and more innovations and promising use cases are coming to market. Let's see where the industry is now.
- IoT compatible security systems. It's all about keeping users safe on multiple devices. IoT helps create an ecosystem for access control and identity maintenance. This is why connected devices exchange passwords, digital certificates and biometric data.
- Portfolio of things. These applications add secure IoT payments to portable devices. In addition, Wallet of Things provides users with real-time access to purchase logs and creates expense models.
- Custom insurance. To improve their services, service providers can monitor customers' security habits in real time. In particular, base insurance rates on mileage and driving habits. More connected data will improve the accuracy of vehicle tracking and increase the number of metrics to analyze.
- Intelligent payment contracts based on the IoT. Indeed, adding the concept of "smart contract" blockchain to IoT payments is a brilliant idea. This combination creates a secure, controlled and manageable environment for money, stock, property and other financial exchanges.
Cost of developing IoT Fintech tools
Because IoT projects are complex, it is difficult to estimate the cost of development. The good news for the number is the dedicated tools. Finance officials can calculate the cost of an Internet of Things project with remarkable accuracy. Here is an example of IoT product development costs broken down by component types using the IoT cost calculator:
|Component type IoT||Minimum Cost||Maximum cost||Number of hours|
|Custom material||$ 147,900||$ 220,300||4900-7300|
|Mobile application (Android, iOS)||$ 197,700||$ 296,600||6600-9900|
|Web application||$ 183,600||$ 275,400||6100-9200|
|Web Database||$ 59,500||$ 89,200||1200-3000|
|Desktop application (macOS, Windows, Linux, Unix)||$ 316,000||$ 474,000||10500-15800|
Note: Estimates show a feature-based model. The table below shows the costs of a highly functional project. Prices can vary for basic IoT products.
A common problem in the financial sector is the asymmetrical distribution of data. An obsolete approach to management and restoration limits the scope of services. For example, this affects the provision of relevant information to users. Avoiding credit risk and proactively managing the customer's financial routines are the key examples.
By using the Internet of Things, we can dramatically improve financial services. In summary, the most promising benefits of technology include:
- faster risk management;
- improvement of data collection and storage algorithms;
- improve the habits of buying a customer with intelligent hardware.
A systematic approach to using the Internet of Things to develop products for the financial sector is the key to success. Start by knowing the problems with which the company is most in trouble and find an economical IoT solution to solve them. The cost you spend on innovation will pay back soon.