Banking Article, Banking Finance 2022, Banking Finance September, 2022



The Internet of things (IoT) is considered to be the next big thing in financial sector. It is fast becoming a disruptive technology business opportunity, with standards emerging primarily for wireless communication between sensors, gateways, controlling units, cloud-based services and other gadgets in day-to-day human life, all in general being referred to as “Things”.Internet of Things (IoT) provides customer data that helps banks to identify their customer’s business needs and value chain, e.g., retailers, suppliers, and distributors. The data also lets the banks gain insights into customers. In the agricultural sector, farmers who are the bank’s customers can gain solutions from the Internet of Things (IoT). For instance, banks are able to analyse agricultural output in addition to other crop farming conditions that allow the banks to estimate the crop output value. Based on the crop yield calculated through Internet of Things (IoT), the banks can provide flexibility based on expected yield, frequency, and crop performance, when it comes to financial terms. Such knowledge will help the farmer and the banker develop a stronger relationship. This article addresses the Internet of Things (IoT) as the main enabling factor of promising paradigm for integration and comprehensive aspects of several technologies for banking solution.


The Internet of Things (IoT) describes the network of physical objects “things” — that are embedded with sensors, software, and other technologies for the purpose of connecting and exchanging data with other devices and systems over the internet. These devices range from ordinary household objects to sophisticated industrial tools. Examples of Internet of Things are connected appliances, smart home security systems, autonomous farming equipment, wearable health monitors, and smart factory equipment. A light bulb that can be switched on using a smartphone app, by using voice command or by a motion sensor is an Internet of Things (IoT) device and system.


The Internet of Things (IoT) is a rapidly evolving field of technology, but its roots have been decades in the making. The Internet of Things (IoT) has not been around for very long. It was only 1999 that the term “Internet of things” was used by Kevin Ashton during his work at P&G which later became widely accepted. Ashton used the phrase as the title of his presentation for a new sensor project he was working on. Later on, this term was mentioned in the famous publications like “The Guardian, Boston, Globe and Scientific American” in their respective articles. In 2005 UN’s International telecommunication union (ITU) published its first report on this topic. According to Cisco Internet Business Solutions Group (IBSG), the Internet of Things was born in between 2008 and 2009 at simply the point in time when more “things or objects” were connected to the Internet than people.

Working mechanism:

The Internet of Things (IoT), consists of all the web-enabled devices that collect, send and act on data they acquire from their surrounding environments using embedded sensors/devices, connectivity,data processors and communication hardware. The Internet of Things (IoT) platform connects devices with built-in sensors, which are used to collect data and analyse it. The data-specific appliance receives the information according to the address. Internet of Things (IoT) technology works meticulously to ensure that no data is inaccurate or deceptive. This is so that different patterns can be discovered and recommendations can be made.

The various Components of Internet of Things (IoT) system are:

  • Sensors –The Internet of Things uses sensors to detect any disturbance in internet communication between devices, appliances, and automobiles. This allows for collecting data in the environment, such as temperature, location, and other helpful information.
  • Gateway –This type of bridge allows data to be transferred using wired or wireless technologies such as Ethernet and Wi-Fi. In terms of bandwidth, connection range, and power consumption, the approaches differ slightly. However, it is advisable to choose one that is compatible with the IoT system.
  • Controlling Units –A controlling unit is a device or gadget that receives alerts, checks the network, and allows users to make necessary adjustments. This, however, is contingent on the system’s complexity, which aids in the implementation of required adjustments.
  • Cloud-based services –To maintain control between the controller and the device, IoT technologies rely on cloud-based services. Furthermore, cloud-based data warehousing is simple to use with mobile devices.

Advantages of Internet of Things in Banking:

  • Improved Financial Practices for Customers

Utilizing Internet of Things (IoT) devices, can enable bank customers to change their financial habits and tackle the over-expenditure problem. For example, if a user has set a credit cardlimit, the wearable will monitor the customer’s spending daily, weekly or on monthly basis as set by the user. An alert will be elevated as the limit approaches. If the user ignores the signal and continues to spend, the wearable would send a shockwave to their wrists, which served as a potent reminder that their spending and the daily limit are not very well.

  • Enhanced Banking Experience

Internet of Things (IoT) gives timely insights and individualized experience to customers. Device connectivity enables a customer to schedule an appointment and be able to check it inside their smartphone. The customers will know when is their turn to stand at the counter, instead of waiting in a line. Apart from this, the bank also keeps the customer’s visits in their database, the services they use whenever they visit the bank, and their queries.

  • Efficient Branch Banking

The modern branch system in banks is under threat from increasing operational costs. Customer’s traditional banking habits are also being challenged by COVID-19. People were advised to use contactless payment and avoid handling banknotes as much as possible since the COVID-19 virus can survive for days on notes, speeding up the disease’s spread. While banks are keen to maintain the traditional banking approach and ensure that it adds value, financial institutions need to use technology to meet demands.Banks use the Internet of Things (IoT) technology,for example biometric sensors can be used to gather user data while entering the bank and forwarding the information to the primary system. Utilizing smart branches allows bank managers to reduce both the number of staff and the maintenance costs while also reducing the waiting time for the client. The managers create a connected system of communication between different branches at different locations. Using the Internet of Things (IoT) system, virtual branches can be created, where there are no real employees, a user often gets guided by a system or chatbots based on technology. There are random questions, so the chatbots can use video conference tools to contact a real human consultant.

  • Making Wireless Settlements

Internet of Things (IoT) in monetary solutions, is additionally changing exactly how individuals make payments. Wearable devices are replacing smartphones and traditional credit cards, in making wireless payments as well as cash withdrawals. Statistics predicts that the number of connected wearable devices willget to over 2.5 billion by 2024. Thus, more people will undoubtedly be making use of these devices for everyday activities in the coming years.

Disadvantagesof Internet of Things in Banking:

  • Potential Hacking

As the number of connected devices increases and more information is shared between the devices, the potential of a hacker to steal confidential information also increases.

  • Management of large number of IoT devices

Enterprises may eventually have to deal with massive numbers of Internet of Things (IoT) devices, collecting andmanaging the data from all those devices will be challenging.

  • Mass corruption of Internet of Things (IoT) system

If there is a bug in the system, it is likely that every connected device will become corrupted.

  • Lack of International Standard of compatibility

Since there is no international standard of compatibility of Internet of Things (IoT), it is difficult for devices from different manufactures to communicate with each other.

Future Banking using Internet of Things (IoT):

  • Account Management on Things

As more devices acquire digital interfaces, the digital banking will acquire new meaning and customers will be able to access their bank accounts from practically any “thing” that has a digital interface.Biometrics, voice or touchcan simplify account access in these new “anywhere” digital channels. This will eliminate barriers associated with in-person, paper-based transactions and enable clients to conduct business even when they cannot be physically present.

  • Leasing Finance Automation

Real-time monitoring of wear and tear of assetscould provide important data points for pricing of leased assets. Terms of leasing could be simplified and automated as the bank wields greater control over the leased asset. For instance, in case of contract termination or default, the leased asset could be locked or disabled remotely by the bank.

  • Smart Collaterals

Internet of Things (IoT) technology can enable banks to have better control over a customer’s mortgaged assets, such as machinery, and also monitor their health. In such a scenario, a retail or SME customer could possibly raise short-term small finance by offering manufacturing machineryas collateral. The request for financing as well as the transfer of ownership could be automatic and completely digital. Enabled by digital identity for people as well as things, the transfer of ownership of an asset can be achieved in a matter of seconds. The bank can then issue the loan immediately, and monitor the collateral status in real-time without the need to take physical custody of the asset.

  • Risk Mitigation in Trade Finance

Internet of Things (IoT) will accelerate the tracking of the asset in trade finance, for instance, monitoring temperature of the container for shipments involving temperature sensitive goods such as pharmaceuticals and medicinal molecules. Alerts could be triggered if there is a chance of spoilage during the shipment process. These implementations can result in risk mitigation and more informed decision making at banks for scenarios involving trade finance.

  • Wallet of Things

Each and every home appliance or consumer equipment could eventually host an embedded, pre-funded wallet that is capable of managing its running expenses on its own. For example, an autonomous car could potentially pay for parking, gas, rental or even maintenance service using its embedded wallet.

  • Smooth Customer On boarding and KYC

People use their Facebook / Gmail id to login to different Internet sites, this might be extended in the future to have a block chain-based unique digital signature which is used for most transactions. This universal block chain-based digital identity may also help with KYC processes in the future. Additionally, knowing about the financial inclinations of the customer through the digital signature, banks can offer relevant products at the time of on boarding – for e.g. credit card designed with rewards from a particular petrol station or particular apparel brand that the customer uses frequently.

  • Customized Auto Insurance

Here digitization will throw up newer metrics that can be used to provide tailor-made insurance to customers based on driving habits, engine health and general wear and tear of the vehicle. Insurance Companies will offer devices that plug into the on-board diagnostic port of cars and send driving behaviour data back to them. Based on driver habits, the owner is eligible for discounts. Apart from this, by overlaying GPS data on the actual speed of the vehicle in speed sensitive zones e.g. schools or residential areas, insurance companies can gain critical insights into the likelihood of accidents and price insurance premiums appropriately.

  • Real-time and customized Life Insurance

By combining health metrics from wearable with medical history, a biometric digital identity storage, people will be able to request and get life insurance instantly anywhere, anytime. Time required for underwriting could also be drastically cut from months to near real-time.

  • Peer 2Peer Finance on Tangible Assets

In the future, it might be possible to lease assets to individuals or businesses through 100 percent online services that directly match lessor with lessee. Leveraging digital identity, the leasing process can be completed in real-time as the ownership of the asset can be switched from lessor to lessee in a second after payment is confirmed. This has the potential to unleash a completely new business model, whereby any financial dealings based on digital objects can be carried out peer-to-peer, disrupting banks in areas such as leasing and mortgage.

Latest development:

NASSCOM, in partnership with the Ministry of Electronics and Information Technology (MeitY) and government of Andhra Pradesh, on 30/11/2021 launched a centre of excellence (CoE) focussed on Internet of Things (IoT) and Artificial Intelligence at Andhra University Campus, Visakhapatnam, aimed at promoting innovation in emerging technology. This will

promote entrepreneurship by providing an incubation facility for peer-to-peer learning and the benefit of an industrial environment.


Internet of Things (IoT) is not a science fiction anymore, it has become a reality now. It is alluded to the monitoring and controlling of processes via the internet. Rather than embodying manual efforts to execute daily tasks. Internet of Things (IoT) has reformed how we deal with things,making business faster, economical, and more systematic with each passing day. The financial business is becoming more significant than ever before. It will also transform retail banking, core banking, and other financial software in the future. With the blend of client management, business automation, and transformed transactions, Internet of Things (IoT) in Fintech is proven to be fruitful. When it comes to banking ithas made the transition from traditional processes to modernized one seasier that provide better customer experiences. One can see Fintech and banking organizations are stepping outside their comfort zones to adapt to Internet of Things (IoT) technology and become market leaders. Banks are required to use Internet of Things (IoT) technology to transform data into actionable insights that help them make better decisions. The increased use of devices by bank customers had led to an increase in Internet of Things (IoT) data usage. Banks can also use Internet of Things (IoT) data to improve their customer interactions and deliver personalized services and products. Today banks need to turn the IoTderived data into useful information that will help them make right decisions. The banks can increase their market share through the data obtained, and use the same to offer better services to the customers.

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