How IoT Fits in Finance
Whether improving the security on construction sites or modernizing the education system from the inside out, connected technologies are revolutionizing the way modern industries operate. Finance is one sector embracing IoT technologies to solve new and existing challenges, with industry leaders now investing in IoT solutions at a rapid pace.
An Investment In IoT
The adoption of IoT in finance appears to be gaining momentum.
According to Technavio, the IoT in Banking and Financial Services Industry (BFSI) is expected to grow at a CAGR of 7.91% over the next 5 years, with the bulk of that growth coming from North America. The report identifies a growing interest in smartphone payment technologies and digital wallets as among the key drivers of this investment.
Elsewhere, Markets and Markets believes that the global IoT in BFSI market should reach a valuation of more than $2 Billion by 2023. The study expects IoT devices to impact every corner of the market but highlights an increased focus on connected banking and its reliance on real-time data.
Both studies suggest an increased role for IoT in finance in the coming year. Yet the question remains, how will the finance industry utilize IoT?
The Applications of IoT in Finance
IoT technologies offer numerous benefits to financial institutions. For the most part, real-time data gathering is at the heart of these innovations. Connected technologies funneling information to the cloud let banks more accurately track, monitor, and report activity on a client’s accounts, provide the most up-to-date information on their transactions and even keep customers abreast of the lines at their local branch.
This data provides AI and device-to-device communication protocols with an incredible amount of information that can better inform the decision-making process. These programs coalesce numerous data flows into a single, easily interpreted stream, which can then provide users with clear and actionable intel when making investments or purchasing stocks, for example. Up-to-the-second data could even be used to improve customer service via smart ATMs, sophisticated virtual assistants, and improved functionality of services.
This unprecedented access to information has made security another focus of IoT in finance. Whether it’s improving physical security via remote monitoring capabilities and instant incident reactions or detecting and preventing fraud through complex data-driven AIs and behavioral analysis, IoT technologies offer a broad set of capabilities for improving the safety of financial holdings.
Challenges to Adoption
Of course, new technologies also mean new challenges, and the financial sector’s adoption of IoT does have some hurdles that may arise. For one, more connectivity does invite more potential data breaches, and no data is more sought by bad actors than financial information. Banks and other financial institutions will need to design their IoT deployments with this in mind and limit the number of access points and ensure secure connections through private networking, among other security measures.
Data management will be an issue as well, as the sheer volume of information that will be generated – particularly via mobile devices – can be overwhelming. As such, parsing through this mountain of data would require complex AI to create actionable insights. Unfettered access to information also inspires some concerns over privacy, as these user profiles would certainly include sensitive information that many would not want shared with other companies or entities. It is likely that new legislation tied specifically to the data generated by financial services will be required to outline the best practices.
Similarly, because of the number of people and businesses that rely upon financial industries, maintenance of the IoT devices used in banks and other institutions will also need to be well regulated. With the sheer variety of IoT devices on the market, as well as the numerous manufacturers producing them, there are no existing standards for maintaining or securing these devices. It may fall, then, on the financial industries themselves to establish procedures for maintaining their fleet.
What Does the Future Hold for IoT in Finance?
It is clear that as IoT technology matures, the finance industry will employ these new and exciting tools to improve the customer experience. According to Manuela Veloso of JPMorgan Chase, that future is closely tied to the evolving state of artificial intelligence. Speaking with IoTWorldToday, Veloso claimed that AI will become an essential part of the financial landscape.
“As we face increasingly complex decision making involving many participants and many objectives, we will rely on AI assistants to tediously analyze, simulate and evaluate large numbers of alternative solutions,” said Veloso. “AI systems will include explanations and actively request data and feedback to improve their assistance over time, with the goal to capture underlying human values and rules.”
Elsewhere, Helen Sutton, the Senior Vice President for EMEA and APAC at real-time risk assessment firm Dataminr, believes that the finance industry will form its own intelligence organization in order to better police potential threats.
“More than ever, banks and insurers need to de-silo their critical information structures to ensure effective support and security when adopting new technologies and platforms,” said Sutton. “I foresee that almost all (financial service institutions) will review in 2022… whether to create a shared threat intelligence organization between cyber and physical threats.”
However IoT technologies progress, it is clear that the finance industry sees a lot of potential in these connected devices.
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