IoT in Fintech – How It’s Transforming the BFSI Sector

Sudeep Srivastava February 27, 2023
iot in fintech

The banking, financial services, and insurance (BFSI) industry has come a long way since the days of the barter system. Now, we have entered a new era of digital money, as IoT in Fintech has made it easier than ever to transfer funds without having to use physical cash. Cryptocurrency is also gaining traction as a potential replacement for fiat currency, though this is still a postulation.

Thanks to the finance IoT for bringing this digital revolution! This modern technology helps accelerate operations, enhance service delivery, improve customer experience, and more in the finance sector.

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According to Markets and Markets, the global banking and financial services market for IoT is estimated to grow from $ 249.4 million in 2018 to $2,030 million by 2023 at a compound annual growth rate of 52.1% during the forecast period.

iot in finance industry

Benefits of IoT in Banking and Financial Services

The widespread adoption of IoT in the finance industry has given birth to many viral concepts, such as the Bank of Things. More so, IoT in fintech is known to offer data that is useful for banking and insurance institutions to improve services. There are many other advantages of integrating IoT financial services. So, let’s appease the curiosity and see how IoT in fintech can help transform the system.

Cashless Payment Mode

Cash-based transactions have now become a matter of the past. Not only cash but even credit/debit cards are getting obsolete. IoT wearable payment systems have become viral, facilitating users to pay directly through their wristbands, watches, smart clothing, jewelry, or other connected devices and check credit history, balance, and more. According to Statista, the number of IoT-connected devices worldwide is expected to grow from 8-6 billion from 2019 to 29.42 billion by 2030.

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A major contributor to this cash-less trend, or better to say, IoT payments system trend, is the fintech mobility solution providers that develop P2P apps. Undoubtedly, IoT for banking will introduce new payment trends in the coming years, such as smart cards, biometrical tokens, etc.

Also Read: Cost of making a P2P app like Venmo

Immediate Support and Personalization 

What may seem far-fetched is right around the corner. With the help of IoT technology, banks can personalize their customer services to another level.

For instance, to offer immediate customer support, fintech institutions are using AI with IoT. The  IoT devices (smartphones) work as a beacon in notifying the branch managers of the arrival of customers. This can be helpful in the auto-allocation of customers to service providers. It is an absolute way to increase customer experience and satisfaction.

Moreover, with the help of context-aware smart devices, financial institutions can optimize customer service. They can send personalized messages to greet customers as they arrive and whatnot.

Smart Bank Branches and ATMs

In truth, IoT can be the long-awaited renaissance of traditional banks. Its scope is limitless. Taking the above-mentioned point of personalization forward, with IoT, banks can create a more connected environment where everything is focused on providing value to the customers by using the data accumulated by this technology.

Some instances are – After entering a branch, the details of clients’ accounts could be delivered by an IoT-based mobile app or device for real-time services. Not just this, but a customer can also schedule cash withdrawals from the nearby ATM.

Additionally, by analyzing the tracking patterns in the data obtained by IoT, banks can more strategically place ATMs and branches, keeping the demand of the customers at the core.

iot in fintech

Utilization of Voice Technology

The use of voice technology has increased by leaps and bounds since its introduction in the IT world. Fintech companies have played an interesting card in putting this technology to innovative uses. 

In 2016, Capital One pioneered developing qualities in Alexa, enabling users to process sensitive financial data such as credit/debit card balance, information on pending transactions, loans, and related instances.

Improved Spending Pattern

While there are many financial mobile applications that tell users how much they are spending, how they can save money, etc., the integration of IoT technology can take this process even further. It can help users identify their spending patterns and even break out of them if needed. It is way better than those payment statements, which only provide information on expenses.

Authentication and Security

Since the advent of biometric technology, nothing has ever been the same – thanks to IoT devices such as smartphones and wearables. The security and authentication models make IoT in the banking sector quite strong since clients can now log into their IoT-enabled mobile apps, make payments, etc., with just their fingerprint or a selfie.

One worthy example of IoT wearable technology is the Nymi smart wristband. The product analyzes and records the heartbeats of users as biometric authentication. It cleared all the tests and is now deemed secure for such authentication.

Though some may be skeptical of the storage of such sensitive data, to which, Blockchain in Fintech can really come in handy because of smart contracts. IoT has allowed banks to employ these smart contracts to store the users’ credentials, which cannot be tampered with.

Fraud Detection

Carrying this security thought forward, because of the amalgamation of AI in IoT it is possible to make IoT devices more secure and immune to cyber threats and attacks. An AI-powered IoT device can easily detect any unauthorized activities to extract data from the devices, which can instantly alert the respective financial institutions to take protective and proactive measures. 

For example – if a cyber fraud is trying to make any payments using the user’s stolen credentials from a device that isn’t the one the user generally uses and is in a different location, this could alert the institution to block any further transactions.

Risk Assessment for Insurance and Loan

Identifying and eliminating risks in the insurance and loan domain has always been a manual process before IoT adoption. IoT in the fintech industry has come to bring the transformation it was waiting for. 

How?

Well, IoT sensors carry crucial pieces of information about an individual, which IoT technology-enabled insurance companies can use for monitoring and analyzing one’s habits and past patterns relating to health, driving, etc. It will allow them to distinguish the candidates who can qualify for insurance based on the data accumulated by the IoT device. 

A suitable example of IoT in financial services model is, vehicle guarantors/insurers will be able to provide customized protection bundles by reviewing customers’ driving conduct and other factors such as normal speed, time, etc. And all this data can be accessed by IoT sensors in and out of the vehicle.

Note: These sensors may add to the vehicle’s maintenance cost, which insurers could have to cover.

Connected Cars in Retail Banking

Smart vehicles are not just a boon to users but also a promising prospect for banking institutions. One appropriate example of this is Idea Bank which has taken the initiative of ‘mobile ATM’. 

A fleet of cars has been customized using a security deposit box and an ATM which any user can ask to come to them and use it. This saves a trip to an ATM every time users need cash – so much for personalization.

Smart Housing

IoT solutions have opened doors to new opportunities for insurance companies worldwide. With the advent of smart products by Google and Amazon, insurers have become more open to trying smart housing and health segments. Insurers like Allianz have started to sell integrated products via Google Nest and offer insurance discounts for people who integrate their homes with smart-home devices.

Banking on Wearables

The wearable device has apparently been the most effortless ‘win’ for banks so far due to the developing system of devices and the relatively low cost associated with getting started. Presently numerous banks provide applications for famous wearables like Apple Watch and FitPay, which is working with the Bank of America. A few banks have even dispatched their own gadgets, with Barclays revealing bPay wearable contactless payment solutions and other wearable bands coming from Caixa Bank, Hellenic Bank, and Australia’s WestPac.

iot in finance

Applications of IoT in Banking and Financial Services

Applications of IoT in Banking and Financial Services

1. Cash App

Cash App is a leading mobile payment service available in the US and UK that allows users to transfer money to one another at just a few taps of a mobile phone. Additionally, it also facilitates users to buy stocks and perform other transactions. This is a great IoT and finance alternative for traditional point-of-sale technology.

Related Article: How much does it cost to build an app like Cash?

2. Mastercard

Mastercard is a global leader in payment innovation and technology that uses IoT technology to streamline everyday activities, resulting in innovations like IoT-connected key fobs (with General Motors), contactless payments (with Coin), smart refrigerators to re-order groceries (with Samsung), etc. It connects billions of consumers, issuers, merchants, governments, and businesses worldwide with its convenient payment experiences. It is committed to advancing the way people pay and get paid, helping to create a world beyond cash. 

3. Metromile

Metromile uses IoT-connected trackers to provide per-mile insurance plans that are also easy on the pocket, based on mileage and driving behavior. The brand is an example of IoT and finance done right. Metromile is at the forefront of the payments revolution, enabling people to use their money in more places, in more ways, and for more things than ever before.

Also Read: How much Does It Cost to Build a FinTech App?

Future of IoT in Financial Services

The future of IoT seems to be bigger and brighter by the looks of its widespread usage across the BFSI market. While IoT technology has already been at its best efficiency in the banks and finance industry, it can be further explored to create robust interconnected systems that protect against information attacks and fraud while resolving many other challenges that FinTech companies face.

The humongous amount of data collection from current IoT solutions and upcoming devices will become the future of the banking industry. Distributed stream computing platforms are coming forth as the future of IoT since they offer real-time analytics with pattern identification. 

In fact, according to Markets and Markets, IoT’s market size in the financial and banking industry is projected to grow by $566.4 billion by 2027

In straight terms, IoT in Fintech will continue to be a driving force of the future of online banking. We can expect greater use of IoT, AI, Blockchain, and other technology adoptions in financial transactions by 2023-2024.

Consequently, consumers can have access to more sophisticated and more tailored services catering to their specific individual needs. As IoT in fintech and other technological innovations continues to shape the finance industry, banking and financial institutions must stay ahead of the curve or risk being left behind.

Leverage the Benefits of IoT in Fintech with Appinventiv

IoT is witnessing massive adoption over the past few years in the banking and finance industry. It is beneficial for both customers and businesses alike. It is why intelligent technologies like smart security systems, digital wearables, smart clothing, etc., are being used heavily in various fields, including FinTech.

The Internet-of-Things (IoT) has given the fintech industry an incredible boost, particularly in terms of payment processing and security. IoT is primarily used as a mobile point-of-sale system, allowing customers to make payments from anywhere. IoT is also a cybersecurity tool, providing a secure way to process and encrypt payment information. It has made the fintech industry more efficient, reliable, and secure.

Thereby, designing a robust solution that seamlessly comprises all the features of IoT technology calls for a highly strategic plan and careful execution of the same. That’s what we have done for ActiDrive, and follow the same approach for all of our clients. Here’s a glimpse of our strategic action plan for IoT use cases in financial services.

  • Validation of concept – Our business managers research the market and ensure that the solution would bring them growth and revenue while giving their users complete value. It is where our product design sprint approach comes in very handy. 
  • Data structure – Our engineers analyze the kind of data which would be generated and how it would be gathered and processed. As a rule of thumb, you must narrow data down to a set vital for your product’s functionality. To this extent, everything from storage requirements to data processing must be set in stone. 
  • Hardware dissection – All the applications of IoT solutions revolve around hardware choice. And the inclusion of IoT in the finance industry is no different. Our system architects dissect the hardware sensors, IoT wearable, BLE beacons, etc., in an ode to ensure that the connection is extremely seamless and glitch-free. 
  • Software development – To make the best use of IoT in the financial services industry, your product should have a multi-layer backend. Our engineers integrate the product with third-party solutions in a way that your application sets an example of the usage of IoT in the finance industry and successfully meets all the security challenges.
  • Testing & Maintenance – The actual benefits of IoT for financial services can only be availed when it follows the proper testing and maintenance practices. Our QA experts work on IoT solutions in a way that they can set an example for IoT fintech startups across the globe. 

We are a leading IoT app development company that helps you leverage the latest technology to the utmost and provide better ROI for your business. Our cutting-edge IoT solutions can help you gain a competitive edge by shifting to a new level of security, data-driven customer service, and process automation.

Reach out to Appinventiv’s team to learn how our IoT in Fintech services can help advance your BFSI business. We can be your one-stop partner to provide expert consulting services and end-to-end IoT development.

FAQs

Q. What is IoT finance?

A. Also known as the Bank of Things, the concept of IoT finance defines the applications of the combined power of IoT and the Fintech domain.

Q. How are FinTech companies making use of the financial IoT trend?

A. There are a number of ways that financial institutions are making use of Internet of Things (IoT) technology to improve their services and operations. 

  • IoT technology can be used to track customer data and transactions and manage the performance of financial institutions. 
  • By using IoT technology, financial institutions can gain greater insight into customer behavior, allowing them to tailor their services better to meet customer needs. 
  • Additionally, IoT technology can be used to improve the security of financial institutions, as well as to automate various processes, such as fraud detection and customer service. 
  • By utilizing IoT technology, financial institutions can improve their efficiency and customer experience while also ensuring the safety and security of their customers.

Q. What is the impact of IoT for the banking industry?

A. The impact of IoT for the banking industry is substantial, allowing banks to offer more personalized services to their customers. For example, banks can use IoT devices to monitor customer spending habits and provide tailored financial advice. Additionally, IoT devices can be used to provide customers with more secure banking services, such as biometric authentication and fraud detection.

THE AUTHOR
Sudeep Srivastava
Co-Founder and Director
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