By: Vijay Sawarkar, Banking & Payment Consultant

What is IoT?

The IoT refers to smart devices connected over the internet/ a network, which includes smartphones, wearables such as Fitbit, Apple watches, etc., home assistants like Amazon Alexa or Google Assistant, and toll payment devices such as FASTag, developed by the National Payments Corporation of India.

These smart devices help end-users/customers access various banking services offered by their banks. Advanced sensors within these smart devices are used to connect to the internet infrastructure. This infrastructure allows these smart devices to send and receive information with each other through a banking platform with the help of software and hardware components.

The communication between smart devices enables banking operations to be cost-effective, reducing overall costs and enhancing productivity. These sets of information exchanged between banks and smart device users using banking services on devices like mobile phones, tablets, laptops, and wearable/watches are tracked by IoT to analyze customer demands, behavior, and purchase patterns to capture real-time analytics.

Banking Facilitated by IoT

Smart devices used by end-users/bank customers to access data are collected by banks. This data is processed by IoT platforms within banks to have a full view of a customer’s financial details and their real-time financial needs.

IoT can facilitate a powerful tool for banks to increase customer loyalty. This helps in bringing more business, based on the anticipation of customer needs. IoT also helps provide an additional feature where banks can engage and communicate with the customer frequently. This feature could be more rewarding to customers in certain areas of life, beyond financial needs.

Benefits of IoT in Banking

Here are a few advantages of implementing IoT in the banking industry.

Real-time data analysis of the usage of ATM kiosks by customers in different areas of the city/suburbs can help banks decide on whether to introduce new ATM kiosks or decrease the number depending on the usage statistics. Additionally, IoT also can cater to bringing in on-demand services such as installing ATM kiosks closer to users’ vicinity, which helps enhance customers’ access to banking services.

The customer data captured by IoT helps banks identify their customer’s business needs and value chains, e.g., retailers, suppliers, and distributors. This data also lets banks gain customers’ financial insights as well.

The customer information gained via IoT platforms allows banks to provide personalized banking services, value-added services, and financial product assistance to the customers, end-users, and all the involved parties using smart devices.

Improved Financial Practices for Customers

IoT-linked smart devices can help customers in various ways such as changing their financial habits or keeping track and warning them of daily/weekly/ monthly expenses. The interactive IoT approach started to use wearables, like smartwatches, as a part of education programs for bank customers.

Wearable devices can keep monitoring a customer’s spending for a specified period. An alert will be triggered to the wearable once the spending amount limit is reached, which is predefined by the customer (the spending amount limit is a sub-limit specified by the customer as per his/her choice). If the user continues to ignore such an alert and spends beyond the sub-limit, another signal is sent to their wrists. This will serve as a final reminder that their spending limit (daily/weekly/monthly) limit has been crossed.

Enhanced Banking Experience

IoT enables banks to affect the customer service experience in many ways. It gives customers individualized financial updates and a personalized banking experience.

Given the situation, linked smart devices help banks schedule and track a customer’s appointment, and check their calendars/agenda for a better customer experience. These arrangements can help customers know their turn to stand at the counter without waiting in a queue for a longer period. It also helps the bank maintain information related to a customer’s visits in their database, for instance, the services they use during a visit to the bank, and their questions, if any.

In the current market scenario, IoT already has started eliminating the need for plastic cards by introducing an interactive debit/credit card approach. A customer is provided with an interactive digital display on IoT-linked devices, smartphones, or wearables, which acts as a virtual debit/credit card. Every time a customer makes a purchase, whether at a fuel station or supermarket, they can make use of IoT-linked devices to complete it with the Near Field Communication (NFC) mechanism. Once the purchase is complete, the bank can internally charge customers by debiting their bank accounts.

Conclusion

Recently, it has been observed that there is a significant increase in IoT data usage due to a rise in the use of devices by bank customers. The global IoT spend in the BFSI market until early 2018 was valued at USD 17.85 billion. However, global spending is predicted to reach USD 116.27 billion by 2026, with a CAGR of 26.5 % during the forecast period.

Hence, it is evident that data collected over IoT devices can improve customer interactions and help deliver personalized /tailored services and products matching individual banking needs.

References

https://www.fortunebusinessinsights.com/industry-reports/internet-of-things-iot-in-bfsi-market-101826

https://theceoviews.com/iot-in-banking-industry/

Internet of Things in BFSI Market Size, Share | Global Report, 2026 (fortunebusinessinsights.com)