Does IoT impede or support the future of banking?

The internet looks set to advise many aspects of our lives from the moment we wake up in the morning until the moment we go to sleep. Even the humble toaster can be connected to a wireless network whilst heating up bread for our breakfast. Since the inception of Internet of Things (IoT), over 50 billion devices have been connected to the internet. According to McKinsey and Co, by 2025 the impact IoT industry on the global economy will be as high as $6.2 trillion.

Some companies such as Samsung, Fitbit and Facebook are utilising this data to create major innovations in customer relationships. One of the greatest learnings from IoT is the change in consumer behaviour. Products like Amazon Dash can now assess their buyers to know when they need a product most. Consumers use IoT devices because of their ease of use, and expect advanced personalisation as they know vendors will have behavioural data collected via cookies.

IoT is creating more opportunities for banks to get to know their customers better. These devices enable new revenues for the bank, by creating partnerships with other sectors already deeply involved in IoT. For example, banks can start introducing mortgage offers via real estate websites, or segment their customer base to generate targeted adverts for home or car loans. Partnerships with smart home players can enable automated payments from a TV or fridge. Banks can also enhance their existing relationships with card industry, to develop customer-centric offers, delivered through user-friendly devices and using data based off previous purchases and transactions.

With modern customer expectations knowing no boundaries, banks are in danger of losing out to tech innovators. In the IoT Age, banks will find it more difficult to be in direct contact with customers because technology and smart device providers are attaching themselves onto the customer through smartwatches and could offer their own financial services. Contrast this to ten years ago, when high street banks were the only viable lending and saving providers.

Through the use of IoT, banks will be to able improve customer relationships. For some, it is already happening. Citibank has started trialing the use of beacon technology to give their customers special offers, from location-based knowledge via customised messaging direct to their mobiles. This technology can also gather other insights such as user waiting time in banks, therefore banks can improve their customer service on site hiring more staff to liaise with customers.

There is greater pressure on banks to use this new data to redesign customer relationships. Banks should use all the data available to them generated by both traditional channels and IoT data. The insights from IoT can enhance a bank's existing understanding of their customers’ needs and habits in real-time. With these understood, the bank can start tailoring their services towards each customer.

Are high-street banks equipped to work with new data types where source-complexity and formats hinder consumption, as well as new analytical techniques required to find patterns and trends?

The power of IoT can be harnessed for success if banks evaluate how it fits into its current technology infrastructure. Hindered by legacy IT, traditional banks are often slower to embrace IoT compared with Challenger Banks. New banks are forcing traditional banks to change quicker because the technology they are adopting is driving customer services levels. To solve this challenge, established banks need to make sure their technology can bring together and handle the new types of IoT-generated data streams, information can be accessed by the customer and bank faster.

Banks have a vast amount of sensitive data which remains a target for criminals while it is stored on or moving around the network. IoT can add personalised security layers to data through fingerprint authentication, voice-recognition and random password generation.

The face of banking and customer relationships will change through the use of IoT. Not only will banks have to adapt to a more customer focused viewpoint, they need to predict future consumer behavior. By using IoT devices, consumers will be able to access a variety of products fast and make purchases quicker, smart banks will find a way to ensure they are at the forefront of every interaction.