Mar 21


IoT Makes Dollars and Sense in Financial Services

By Great Bay Software

Today’s banking customers are accustomed to convenient and individually tuned services across markets, and as a result, they are demanding more from their financial services providers than ever before. To keep clients happy, attract new business and gain valuable efficiencies, banks are turning to connected devices and the Internet of Things (IoT).

The banking industry’s incorporation of IoT into their business plans has begun in earnest. According to Tata Consultancy Services, financial institutions expect to have an annual IoT budget of $153.5 million by 2018.


Banks aren’t just looking to keep up with customers’ current demands. They’re investigating new ways to better serve them—and differentiate their businesses. Simultaneously, they’re gaining valuable insight into customer banking behaviors. The Tata report found that 65% of global banks monitor customers’ banking activity through mobile apps, and 32% use sensors and other IoT devices to monitor retail locations such as bank branches and ATMs. More than 20% use digital sensors to gather product performance data, and 16% track customers’ banking usage through smart watches and other wearable devices.


Smart, Disruptive Moves

One of the most forward-thinking and adroit ways with which financial services organizations are leveraging IoT technologies to keep customers happy, gain new clients, and differentiate themselves is by investigating—and investing in—disruptive technologies and strategies. Three of the big areas for IoT are mobile payment, voice-enabled banking capabilities, and proactive event monitoring.


Making Mobile Payments More Flexible

While mobile banking is the most familiar high-tech offering, many financial institutions are investing in mobile payment options. Which makes good financial sense, since its projected growth is significant.


Business Insider estimates that between 2015 and 2020, mobile payment volumes will rise by a compound annual growth rate (CAGR) of 80%—reaching a value of $503 billion by 2020. It also projects a significant uptick in US consumers making mobile payments. It forecast the number of in-store mobile payment users to rise at a 40% five-year CAGR to reach 150 million by the end of 2020, representing 56% of the consumer population.


The scope of what type of “things” can leverage mobile payment is increasing—rapidly. Financial services goliath Visa recently expanded its Visa Ready program, which certifies and secures payment experiences for the Internet of Things. This expansion is providing a trusted offering for companies and device manufacturers who want to jump into the secure and seamless payment solutions pool.


Mobile payments—whether made through phones, smart watches, glasses or cars—offer advantages for all stakeholders, providing faster checkout, enhanced security features, valuable loyalty integration, and much more. These wide-ranging benefits paint a very attractive picture for financial services providers and their customers.


Banking on the Value of Voice

Everyone is familiar with using the touchscreen to tell their phone or device what to do, but as voice services gain a sizable foothold, financial services are starting to recognize they have an opportunity to take advantage of this now more familiar mode of interaction.


Capital One is testing applications using Microsoft Cortana and Amazon Alexa. As the first financial services company to sign on to the Cortana platform, Capital One is looking to find new ways to enable customers to manage their money through a hands-free, natural language conversation.


Citi and USAA, along with other financial institutions, have started testing and using voice technology in another way—as an additional layer of account security for their customers. Think of it as the vocal equivalent of your fingerprint passcode. Whether on the convenience or security side of the coin, the opportunity of leveraging voice in banking holds significant untapped value.


IoT-Enabled Proactive Event Monitoring

Another potentially disruptive application of IoT-enabled solutions is in proactive monitoring. With GPS location already enabled on all smartphones and many wearables, imagine your banking app being able to check in with you when it anticipates an action you might find helpful—an automated financial concierge of sorts. Deloitte imagines a scenario like this:


  • You forgot to notify your bank that you’re travelling to Paris. As soon as you turn off airplane mode on your device after landing , the banking app pushes the following message to you: “Bonjour, how long do you plan to stay in Paris?”


  • You respond via text or voice: “I’m leaving Paris on September 9th.” Your phone or wearable displays a message confirming that a travel notification has been set up on the your account and wishes you a safe and pleasant trip.


These capabilities not only contribute to increased customer satisfaction, avoiding unnecessary freezes on accounts and the like, but also improve security, protecting the bank and customer from fraudulent charges.


Keeping Connected Devices and Data Secure

IoT holds huge promise for financial services, but greater accessibility and ease of use increase security risks, too.  Firms must ensure that connected devices stay secure to protect sensitive data and maintain regulatory compliance.


That’s a challenge, considering that many connected devices are easily hacked. Connected devices are typically purpose-built for a single function, and often lack the proper security required when money is involved. And they’re unable to be protected by traditional endpoint security software or be remotely scanned.


Attackers can use a compromised connected device to spread throughout the bank’s network to find higher value targets. Or the attacker can harness the device for denial-of-service attacks against the banks or other organizations.


Firms can take concrete steps to protect their connected devices. Strong authentication and encryption are a must, and network access should be enforced through airtight policies. Security teams need know what devices—traditional or IoT—are connected to the network at all times. Devices should be continuously monitored for suspicious behaviors that might indicate a compromise or pending attack. And IT needs the ability to stop a device that’s behaving badly by quarantining it or blocking network access. Find out how Great Bay Software’s Beacon Suite can assist in this process here.


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