Banking Article, Banking Finance 2021, Banking Finance September 2021

From Internet of Things to Banking of Things

Introduction

The concept of ‘Internet of Things [IoT]’ emerged in early 1980s when technology started to influence business processes. The earliest example of a machine connected to Internet was a Coca Cola vending machine, located at the Carnegie Melon University. The programmers connected the machine by the internet, to check and see if there was a Coca Cola available, and if it was cold, before making the trip.

The term ‘Internet of Things (IoT)’ was coined by Kevin Ashton in 1999. It comprises of Hardware, Software, Sensors, Devices, etc. that enables real times collection monitoring and analysis of data which can be translated into meaningful actionable piece of information and help to automate the manual process.

IoT is a way in which devices can connect and share information by connecting to internet. With higher fast and cheaper access of internet facilities all over the world, IOT has become one of the major technological evolution in recent times. In simpler terms, the electronic device that is connected to internet is termed as ‘Internet of Things’ [IOT].

‘Internet’ here refers to connectivity and ‘Things’ means devices or ‘The Thing’ [living/non-living] which connects.

The Three questions to be answered in IOTs are

  1. What to measure or What is being sensed? [Sensor]
  2. Which device is connected to internet? [Gateway]
  3. How are sensors connecting to Gateway? [Applications]

Applications of IOT

There are quite lot of applications of IOT in various fields.

  1. Health care – smart watches, glucose monitoring device, heart rate monitoring device etc
  2. Smart cities – for eg, in the city, Palo Alto in San Francisco, drivers are guided to unoccupied parking slot by the smart sensors connected in the parking slots.
  3. In agriculture, a smart green house, where data about the health and growth of the pants are being sensed which help to control the climate inside the green house and provide required nutrients for the plant growth.
  4. Smart home appliances- for eg, a refrigerator which give shopping alerts about items needs to be purchased, a washing machine which alerts about the mixing up of coloured laundry with the white ones, and also many other home automation concepts.
  5. In industries, smart machines that give alerts about repairs, wear and tear etc.

There can be a lot more examples.

The following diagram is an illustration of the applications of IOT

Source:  http:/www.designworldonline.com/tips-on-designing-for-the-internet-of-things/

Some statistics

  • China is the biggest spender in IOT [168 billion US Dollors] in the Asia Pacific Region
  • By 2023, the Asia Pacific region is expected to generate the most revenue from IOT.
  • By 2025, there will be 64 billion IoT devices worldwide. Further, according to McKinsey, 127 new tools worldwide are attached to the web each second.
  • By 2025 the attached gadgets will be more than 75 billion
  • IOT market in India stands at 130 million US Dollors annually.
  • Around 1,820 patents related to the Internet of Things (IoT) were filed in 2017 in India. And there is a steady rise after that too.
  • With over 37 percent, the smart electrical appliances segment had the highest application of the total IoT patents filed by the Indian companies, in the home automation sector followed by smart system security, with a 16 percent application.

IOT in Banking / ‘Banking of things’

‘Banking of things’ means ‘Internet of Things’ applied to ‘Banking’ platform. In Banks, IOT is mainly used to offer better customer service, Business process automation etc. Customers are using Apps/ mobile phones for making enquiries or doing certain transactions, and Banks collect the data from a common interface and offer their services. Thus banks can offer timely and personalized banking services to its customers.

Banks can use IOT sensors to track on various securities, like vehicles, stocks, machineries and other assets.

Banks can convert the data from IOTs into valuable informations and it can be used for betterment of their business products. For eg: tailor-fit loan products for customers based on the data of their needs, interest etc in retail, agriculture, SME etc. Also, banks can advise the customers on better investment options too. This will help banks to canvass more business and to hold a better market share.

Other uses of IOT in banking include use of artificial Intelligence to serve customers better, by reducing the servicing time. Eg: chatbots, visual assistances etc. There is a BMO Harris Bank in Chicago, where the customer is guided by technology and chatbots. For queries, human interface is provided with video calls. According to Business Insider Intelligence reports, by 2022 conversational assistants will help in operational cost cuts of over $ 8 billion across global banks.

Some banks have started using beacons, for example, to send customized offers right to customers’ smartphones as soon as they enter the branch. And some ATMs now have live stream video support that allows customers to speak to tellers if they need additional assistance. IOT technology can make ATM smarter enough to contact technician when needed and send messages to the concerned in an attempt of robbery or theft.

In 2017, a bank has introduced RFID-enabled banking cards, whereby a branch/relationship manager can identify a valued client entering a branch with the card. [The Hindu Business Line 24-02-2017]

Now a days, the same can be done with biometric sensors /devices with IOT too.

IOT s also allow bank customers to change their financial habits and tackle the problem of overspending by sending alerts to the connected device when the set limit in credit and debit cards are reached. Along with payment control, banks can act as personal advisors, information providers also.

IOT s clubbed with AI [Artificial Intelligence] can be developed to detect KYC details, to do due diligence of customers, detect fake notes, early identification of frauds by studying the transactions, reports etc of the account.

In preventing frauds, for example, the misuse of debit or credit cards can be prevented by having IoT enabled security systems with more personal/biometric authorization methods. Also alerts can be sent to the customer regarding the unauthorized usage of the cards, for eg, at ATMs.

Thus IOT in banking helps for better customer service, designing products based on customer interests, ease in survey and operations and also to reduce costs.

Customers also prefers to use IoT in banking services as it saves time and effort and easy to use as well. Awareness, privacy and safety also contributes to the adoption of IOT in banking.

Data is the new oil in the digi-world. BOT devices will be useful for collecting data from customers and store in devices or cloud. Banks can use this data [data mining] at any point of time, and this will be having a far reaching effect in product designing, personalized and customized customer service, credit decisions, and getting early warning signals about loans slipping to NPA category, thus enabling banks to take remedial actions.

The data collected also will be helpful for data integration across the banks, like that of CIBIL/Experian reports. This can detect/ prevent many fraudulent activities in loans, frauds in digital banking, and help to take better decisions in credit and other matters.

Risks involved in ‘Banking of Things’

Various risks are involved in ‘Banking of Things’, most important one is the Security Risks which include,

  • Hackers stealing the data of customers
  • Too much dependency in technology may lead to higher risks.
  • IOT devices are devoid of inherent protection and wireless net works also vulnerable to many risks.
  • Bugs and viruses can cause wide range of damages to the entire system
  • Rectification will take much time and effort

There can be more roles to a bank than from custodian of public money to financial advisor, helping in budgeting, portfolio management, insurance manager including health etc. Data collected through IoT can also help the bank make better risk management decisions. Biometric data collected by sensors assist in the authentication process in all digital banking transactions with a secure access. Eg.  Facial/eye recognition to operate ATM or digital banking apps.

Banks need to make use of latest technology and initiatives to secure the data available with them.

There can be issues in Interaction of multiple devices/ interfaces, Power consumptions challenge as many IOTs run on batteries, Data overload issues [control of data to be sent to cloud or internet should be there] etc. Data security is also one of the major concern in every digital transformation initiatives of banks.

So, we need to switch from ‘Banking’ to ‘Banking of Things’ safely.

Future of Banking of Things

The Bill Gate’s quote, “Banking is necessary, banks are not” is becoming more meaningful with the introduction of new technologies like IOT, Artificial Intelligence etc in the banking system.

As Banking is continuously evolving with the IOT s and other technologies, those institutions which do not stay ahead in these latest technologies, will be left behind.

BoT has the potential of revolutionizing banking in many ways. But as the most important concern with technological advancement is security issues, banks has to develop adequate measures to prevent security breach.

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