IoT for the Financial Sector
By Darren Watkins, Managing Director at VIRTUS
Having been one of the most discussed technology trends of 2015, the Internet of Things (IOT) is quickly moving into business and mainstream consciousness. By now, we’ve all heard of the connected fridge that will order your milk before you run out, or the smart thermostat that will learn your routines to adjust the temperature for when you’re home. However, technology and appliances are not the only industries affected by this growing trend. In fact, potential uses of IOT data reaches far beyond, and could play a major role in helping disconnected industries re-engage with their customers.
One industry in particular that has been struggling to re-connect with customers is the financial sector. Following the 2007-2008 financial crisis, the established financial institutions have struggled to regain, let alone retain, the brand equity they previously held.
Today, consumers of all ages expect smart digital experiences from all companies. With some 20 per cent on bank customers having completely “gone digital” according to a 2015 Accenture study, banks and financial service companies are no exception. However, banks are struggling to keep up, and from here, a “value gap” has developed where customers are not receiving financial advice as and how they need it.
To highlight this, a recent survey by CGI found that while an overwhelming 91 per cent of customers felt it was important to be known by their bank – and 19 per cent being willing to pay a premium for the service – only 24 per cent felt their bank understood any of their financial goals. This lack of trust and value felt by customers has led to a breaking point, where, according to a study by Cisco, nearly one in four bank customers intend to choose a different provider for their next financial product or service. This even includes non-banks such as Google and Apple, as well as retailers like Marks & Spencer.
Due to banks struggling to get to know their customers as individuals, they cannot address their customers’ financial needs and aspirations. As a result, competitors and “digital first” start-ups are capitalising on the four out of five customers who now trust a non-bank to handle their banking needs.
This has been achieved by engaging customers with convenient transactions and proactive services traditional banks are lacking. Banks need to respond to this to retain market share and capture customers or risk losing those seeking better advice and more relevant mobile experiences.
Know your customer
To remain competitive, the established banks and other financial service firms need to start understanding their customers on a personal level. To achieve this, they will need more information than a name, address and credit score. But how can banks find this extra information? The answer lies in harnessing the mass quantities of data capable of being produced by IOT enabled devices.
An example could be IOT enabled wearables. Designed to make our lives easier, they increase the capacity to manage our professional and personal lives on the move, it therefore shouldn’t be a surprise that Cisco’s report found that 63 per cent of bank customers worldwide are interested in using a smart watch for mobile banking and payment services.
What’s more, they are prepared to use these to share their most personal information in exchange for products tailored to their lifestyle choices. 51 per cent of respondents stated they would be interested in a life or health insurance product that tied its rates to healthy habits tracked on a wearable device such as a Fitbit.
In the car insurance space, companies like Aviva are already using apps with GPS data to assess driving habits and offer safe drivers lower premiums. These examples of mobile devices being used to collect highly personal information demonstrates the distinct benefit to customers: delivering the right price for the right policy.
Infrastructure is key
Naturally, this massive influx of data from a new network of connected devices will also need to be stored, managed and analysed. The knock-on effect will inevitably be the need for more resources provided by data centres, resulting in the need for a larger workforce to manage this.
As companies and banks begin to understand that data analytics is not just for reaching out to grow their business, but reaching in to become more relevant, the demand for personal data will only escalate. More industries will inevitably utilise IOT to gather invaluable data, consequently increasing the demand for more space to store the data. In turn, this means even greater importance will be placed on data centres – which will be in increasing demand as the exponential rate of data produced from personal devices, as well as corporate computers, requires expert management.
The finance sector may not be the most obvious industry to actively embrace IOT, but banks are among those in need of quickly creating frictionless interactions with their customers. To do this, they will need to move on from the current archaic, paper-based approach to develop fully digitised business processes. By creating new services enabled by data from IOT devices banks can close the “value gap” and regain the trust of the disillusioned consumer.
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