From the early days of wire transfers to the introduction of credit cards and ATMs, the banking and financial services industries have always been at the forefront of technological innovation. The Internet of Things (IoT) has proven to be no exception to this trend. Some of the most interesting and worthwhile developments in IoT device applications have been in the finance and financial services sectors.
Financial technology and mobile banking were early use cases for IoT devices and it’s no surprise that the market for fintech has grown considerably in recent years. Although concerns about mobile security discouraged some early adopters, innovations in authentication and encryption technology have put many of these fears to rest. Today, mobile banking is used by about 80 percent of Americans, many of whom are also using their smart devices as a primary form of payment. Mobile transactions amounted to $930 billion in 2018 alone and are expected to exceed $1 trillion in 2019.
The widespread adoption of IoT in banking and financial services is only going to accelerate in the coming years as more financial institutions roll out exciting new fintech products. Here are just a few ways that IoT financial technology will impact consumers.
Wearable devices are one of the most exciting IoT applications across a number of industries, and the wearable payment device market is expected to grow from $3.12 billion in 2018 to $11.21 billion by 2026. While a few banks have experimented with providing their own branded wearable devices, most of them are already offering smartwatch applications that allow customers to use wearables as a primary payment device. As the range of wearable IoT devices expands to include accessories like rings and clothing, financial institutions will continue to make it even easier for people to make payments.
In the (expanding) universe of IoT devices, wearables are just one way in which people can access their finances to make and accept payments. Every IoT device has the potential to be a payment device. One innovative example involves automobiles, using the existing in-vehicle infotainment (IVI) systems incorporated into most modern vehicles to facilitate payments for things like tolls, parking spaces, and gas. Voice-activated household speaker devices like Amazon Alexa and Google Home already make it easy for people to purchase items, but smart appliances will also make it possible to fully automate food ordering and delivery.
Although IoT devices certainly present a number of security challenges, they also offer a few notable advantages when it comes to protecting consumers from fraud. That’s because IoT devices can be monitored by AI systems that gather data on financial transactions to create a better profile of customer spending habits. If a cybercriminal attempts to use a customer’s financial information to make a purchase, but the device that customer makes more than half of their purchases from is in a completely different location and not involved in a financial transaction, the financial institution can easily block the fraudulent purchase. Another benefit of IoT in banking is multifactor authentication, making them much more difficult to use than a debit or credit card if they’re stolen.
Thanks to IoT technology, the traditional bank branch could very well enjoy a renaissance. Fully connected smart banks can provide more comprehensive and convenient services to customers. If a customer walks into a branch location, their fintech device could immediately deliver their account information for faster, more personalized service. Tracking patterns in the demand for banking services can also allow banks to place their branches and ATMs more strategically for better convenience. Some banks are also using IoT devices to streamline ATM usage, making it easier and faster to both locate the nearest ATM and retrieve money from it.
Although bank statements have long made it possible for customers to track their spending, the way those statements are structured are often not especially helpful. They tell customers what merchants processed their payments, but often fail to provide the context people need to really understand their spending patterns over a period of time. With IoT devices, customers will be able to construct a more comprehensive picture of how, when, and where they’re spending money. Some devices can even be programmed to help users break particular spending habits.
While IoT in banking is light years ahead of the financial technology that facilitated wire transfers in the early 20th century, they represent the continuation of a trend in the financial services industry to use the latest innovations to make life easier for customers. The latest generation of IoT fintech will help customers to take more control over the ways they manage and use their money, transforming the way people think about their relationship to banking and finance in the process.
As the Marketing Manager for vXchnge, Kaylie handles the coordination and logistics of tradeshows and events. She is responsible for social media marketing and brand promotion through various outlets. She enjoys developing new ways and events to capture the attention of the vXchnge audience.