Written by: Louis Sawyer
The number of connected devices around the globe is expected to exceed 50 billion by 2025. Although it already benefits the manufacturing and healthcare sectors, IoT in finance world is still in its infancy. So far, only a few IoT applications have been found in banks and insurance companies. However, this will change in the long term, and here is why!
IoT as a Tool for Customer Satisfaction
The IoT shows a whopping annual growth rate of 55.3%. As IoT is a hotbed for data collection and analysis, many companies in the financial sector find it an amazing instrument to gather information about their customer base.
Today many banks use it to offer personalized services to customers. They can tailor their offerings to each customer based on his financial plans and analyzed behavior.
Since security is one of the most important issues in the financial sector, many companies also put their eye on IoT as it proved beneficial at detecting fraud activity. Banks use it to better understand customer profiles and thus detect fraud.
With the same data and applications, banks can also partner with other companies and thus provide their customers with previously unknown benefits, such as exclusive offers or discounts. The result: stronger customer relationships and higher brand loyalty.
IoT Application in the Insurance Industry
Insurers are also benefiting from this technology. One of the biggest benefits is (again) client communication processes. Networked devices accelerate claims processing, predict failure scenarios, and simplify risk assessment.
An avid example could be motor insurers. Days are gone when they used to rely on such information as age, address, and driver creditworthiness to assess insurance premiums.
Today 90% of the insurers use telematics and electronic devices that gather specific data about drivers` behavior and how they use their vehicles.
It works as follows: the customer's driving behavior is monitored using a black box installed in the car or on a smartphone app; A score is then determined based on the data collected. This information may include how fast and how much time they spend on the road, and when the vehicle is moving.
If that score is high, a customer is more likely to get a discount for the insurance premium. All of that offers premiums that better reflect specific consumer behavior.
Another example could be health insurance that encourages customers to work out. The bonus is given to those who, for example, regularly get their heart rate up to 120 beats per minute for half an hour or take 10,000 steps a day. To track this, people use fitness bracelets and submit the data to their insurance company.
However, to guarantee acceptance of such technologies, it is important to develop an offer that is attractive to the customer.
Potential in Corporate Banking
Another industry that IoT benefits greatly is trade finance, which is still a costly endeavor. In addition, this area of finance is not known for its pioneering spirit - rather, for its traditional views.
Many trade finance processes are still paper-based. In the context of trade finance, companies hire app developers to build IoT networks that can be used for container tracking to speed up and track the flow of traffic, supply more efficiently.
This helps to reduce costs and risks for companies. However, this will require a comprehensive and global implementation of the Internet of Things. Banks and insurance companies have begun to think seriously about using this technology to compete with fintech and insurance companies.
IoT for Flexible Financing
Internet of Things offers companies flexible financing. This type of financing is based on a company's working capital: as working capital increases, the possible loan amount also increases. IoT records when and what is contributed to the working capital, which means that the loan amount can be adjusted in real-time.
Better Collateral Management
The management of collateral is also greatly simplified by new technology; for example, in a warehouse with changing inventory. To ensure the operability of the financed company, it must be able to dispose of the warehouse.
The borrowing company must keep inventory books. They must accurately describe the goods to comply with the principle of certainty. The financier should check the ledger regularly and make sure it is correct.
How does IoT help?
The Internet of Things can ensure accurate stock ledger management, which makes it easier for both parties. Individual items can be assigned certain identifiers (via radio identification applications). Items can then be identified in seconds without human interaction.
The borrowing company saves itself the time-consuming work of cataloging. The financier saves control time and passes that savings on to the company. The processed data can also be easily entered into the financier's accounting records.
The practical use of IoT in the banking environment can be diverse. Today, biometric and positional sensors are used together with video cameras to recognize a customer from the moment he enters the bank. The analysis of information from sensors placed on ATMs makes it possible to determine the optimal zones for installing the machines. Using information based on customer and location data, banks can anticipate their needs, offering their products, and helping them make financial decisions that are acceptable to both parties.
Author’s BIO: Louis Sawyer is a professional writer, editor and a web design expert. She loves writing about technology trends, web development, mobile games and business issues. Also, Louis works as a proofreader at Computools. Follow Louis on Twitter.