IoT in FinTech: Top 10 Challenges and 5 Applications
The advancement of FinTech services has transformed the way financial services work. The sector dealing with a mammoth customer influx daily is looking for solutions that can improve its operations and efficiency staggeringly.
Of the different FinTech services, the Internet of Things and Artificial Intelligence play a critical role in improving banking and financial institutions.
Growth of IoT in banking and finance or IoT in Fintech
According to Markets and Markets’ latest report, the global IoT in BFSI market is expected to grow from USD 249.4 million in 2018 to USD 2,030 million by 2023, at a CAGR of 52.1% during the forecast period.
Top 10 challenges facing banking and finance companies
Here are the top 10 challenges facing banking and finance companies.
1. Increasing competition
Intuitive customer experience matters today. Many banking and financial companies still rely on traditional systems, tools, and skill sets, leading to customer disengagement and losing to competition.
If companies have to beat the competition, then adapting to advanced technologies like IoT is necessary.
2. Adapting to the cultural shift
Often technology advancement intimations have received stiff resistance from financial staff as they are comfortable with the existing technology and tools. Nevertheless, improving customer service is possible only by improving the processes, workflows, technology, tools, and resources.
And, explaining the benefits of IoT will help the staff realize the technology’s significance and how it will simplify their day-to-day chores.
3. Regulatory compliance
Compliance risk is a common problem faced by most banks and without technology upgrades, achieving regulatory compliance is difficult. Investing in technologies like IoT can easily improve cost savings and security, resulting in lower compliance risk.
4. Changing business models
Businesses have to change their business models based on customer demands and behaviors. Without accurate data and insights, making modifications to the existing model is difficult. Even after changing, you need data to validate the current model is aligning perfectly with customer needs.
5. Growing expectations
Customers’ expectations are always on the rise and the financial companies like banking and insurance must ensure that they have the right data to improve their business performance and operations to serve customers better. Technologies like IoT can help companies improve their customer service exceptionally.
6. Customer retention
While acquiring new customers matters a lot, retaining existing customers with advanced technology and tools is critical for the financial industry’s success. With a lot of competition around them, companies have to rely on technologies like IoT to engage customers better.
7. Outdated experiences
Most customers look for an intuitive and seamless experience when interacting with a banking app or insurance solution; without the help of technology, it is impossible. IoT implementations can improve the performance of the applications by offering personalized experiences.
8. Security breaches
This is a critical pain point most financial institutions face. The technology like IoT can completely eliminate the risks associated with security breaches and instantly alert the banks if any violation is discovered.
9. Obsolete applications and siloed systems
Collecting data from obsolete applications and siloed systems is a headache for most banks and financial institutions. IoT plays a critical role in amassing the data from every application and system and centralizes them under one roof to process, analyze and act.
10. Continuous innovation (lack of insights)
The banking and financial industry has to innovate to beat the competition and engage customers constantly. However without accurate data and insights, this is impossible. With IoT, the companies can leverage data and interpret them for meaningful insights for growth improvement programs.
5 Key applications of IoT in Fintech or banking and financial sector
1. Personalization and rewards
A few years ago, banks and financial companies didn’t have any personalization-based reward programs to entice customers. It all started with the implementation of IoT in the sector.
With IoT, the companies could identify customers’ demographics and preferences, and rewarding them with personalized offers based on their preferences has improved the engagement and trust they have in the bank. In other words, banks are offering outstanding customer experience nowadays.
2. Cashless payments
Earlier, if a user has to withdraw money, he has to visit a branch, stand in the queue to receive the money from the teller. Today, the scenario has completely changed. Banks are offering cashless transactions to customers.
This saves the time of both the staff and users. This is possible with the help of IoT in ATMs and banking premises.
3. Data analytics for decision making
Data is the king for every business, and so is banking. Implementing IoT is a must for banking institutions to amass a massive volume of data from different sources.
The devices can collect the data effectively, which then can be used for analysis and business improvements. IoT improves data collection process and expedites decision-making.
4. Fraud detection and security
Phishing, malware, and hacker attacks are common in financial sectors and the industry is having a headache resolving them. IoT enhances security and ensures that information is not tampered with.
With IoT implemented in the banking and finance companies, the systems’ safety and security are always on the cards.
5. Instant responses and personalization
Years ago, getting responses from banks was sluggish and time-consuming. However, today with the advancement of technology like IoT, it is relatively simple and seamless.
Today banks can easily identify customers’ needs and instantly update them with notifications and responses to improve their experiences. With such an approach, improving customer retention rate is always possible.
These are not the only use cases for IoT in FinTech industry. In fact, there is a wide array of applications. However, I have only highlighted a few.
Whatever it is, the growth of IoT in Fintech sector is imminent, and companies leveraging emerging technology are thriving.
Have you implemented IoT to improve your banking operations and customer experiences?
If not, it is high time you consider one. The competition is brimming, and it’s your chance to stay above the fold with the help of advanced technologies like IoT.
Want to know more or discuss a project idea? We are all ears.
Are you planning for IoT implementation for your financial institution?