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Imagine getting a small shock from your wristband when you go beyond your spending limits. Talk to experts about the biggest trends in the tech sector in the next few years and experiences like this are just the beginning. Prepare for the IoT. Standing for the Internet of Things, this refers to the huge range of digitally-connected devices and sensors that are now cropping up all around the world, in everything from energy meters to cars.

Figures from Gartner forecast that by the end of this year, there will be around 6.4 billion connected ‘Things’ in use around the world, a 30 per cent increase over last year. However, by 2020, this figure is expected to rise to almost 21 billion.

So given that we’re set to be surrounded by these devices, in our personal and business life, whether we like it or not in the coming years, the obvious question for bankers will be ‘how can this technology benefit me?’

Enable more personalized customer service

In the last decade, changing consumer demands have required financial institutions, like many industries, to invest in and develop digital strategies and embrace fast paced innovation. A robust digital portfolio is now a priority for every financial institution that wants to be competitive and grow today. Customers are now able to connect with their financial institution from their laptop, tablet, smartphone and smartwatch. The benefit of these connections is already fueling the innovation of more IoT applications which will enable financial institutions to learn more about their customers’ preferences, behaviors and demands.

In a recent article for Finextra, Howard Berg of Gemalto UK stated that IoT connectivity that allows for the large-scale collection of information on users will present great opportunities for banks to better track and understand their users. “This, in turn, will allow banks to provide customers with a far more personalized experience, with targeted advice, context-aware offers and insight,” he said. “The bank is able to achieve a new level of understanding of the needs of both consumer and business clients, attaining a new level of customer intimacy.”

Of course, this will bring with it a range of privacy and security concerns, as many consumers will naturally be worried about sharing more personal data. Therefore, the banking industry, like any industry that will be connected to IoT must have strong safeguards in place to reassure consumers their information is being handled ethically.

Access to better data means better decision-making

The more we know about the customers we serve, information gleaned from IoT devices could help banks improve their internal decision-making— whether this is in terms of the services they offer to customers or inform product strategy and investments.

For example, real-time data ranging from social media data, spending habits and even property data can all combine to help build a more detailed picture of an individual’s credit risk, allowing banks to make better commercial decisions and offer the most appropriate products and services.

It can also help financial institutions stay one step ahead by giving them better insight into conditions in other industries. For example, data could give a real-time picture of the situation in retail, industrial or agricultural businesses – something that will be vital when it comes to researching new markets and improving underwriting processes.

Infusion of New Innovation

There will be an enormous influence of innovation from FinTech and other industries. If we think the pool is big now the progression of IoT will drive more innovators tinkering toward the next “big idea” from the quirky to conventional. While there is undoubtedly huge untapped potential today for IoT to play a major role in banks’ strategies in the coming years, one of the first real-world examples of the technology is a little less grand in scope.

British tech firm Intelligent Environments recently introduced its ‘Interact IoT’ device, which allows the customers to connect their bank account directly to a range of smart devices.

Among the first to be integrated is a wearable wristband called ‘Pavlok’, which can deliver a small electric shock to a user if they go beyond predefined spending limits—a somewhat unusual way of helping people manage their finances. However, it has more sensible uses as well, such as integration with Google’s Nest home thermostat. This can automatically turn down a home’s thermostat if a user’s account balance drops too low, helping them save money.

While these are relatively simple examples of IoT integration capabilities, we can be certain that in the next few years, the number of use cases for the banking industry will drastically increase as innovation continues and understanding of the technology evolves, making IoT a good bet for the next stage of digital banking evolution.

Susan Whitney is Marketing Lead for Digital Banking product portfolio for NCR Financial Services division.

Image credit: iStockphoto/Maxiphoto



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James W. Gabberty

Gabberty is a professor of information systems at Pace University in New York City. An alumnus of the Massachusetts Institute of Technology and New York University Polytechnic Institute, he has served as an expert witness in telecommunication and information security at the federal and state levels and holds numerous certifications from SANS & ISACA.

Zachary Ehrlich

25-year-old writer, and as a native San Franciscan, I am unreasonably loyal to Bank of America, if only for their superhero-like origin story, involving the 1906 earthquake and Italian fruit vendors.

Brad Strothkamp


Marisa Mann

Marisa Mann brings over 15 years of experience in consulting and financial services industries to the Solstice team, working on large scale enterprise initiatives across many technologies, including specializing in the digital space – Internet and mobile. Mann is passionate about mobile and the endless possibilities for the enterprise, delivering business value through strong brand recognition and driving to excellence in the consumer experience. Prior to Solstice, Mann worked at JP Morgan Chase, Diamond Management and Technology Consultants, Washington Mutual, Inc, and Accenture.