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Banking of Things: Seven fascinating business cases that banks should start implementing now.

Posted on: 16 September '16

Consider this scenario – You are on your way to a meeting and your vehicle already has your calendar programmed. It automatically updates the best route to be taken based on the traffic. In case of any delays, it notifies the other attendees that you may be late. This is nothing but a connected ecosystem comprising of objects, connectivity and application/services – the Internet of things (IoT).

Despite the hype, there have been very few early adopters who have started integrating IoT. The progression of it becoming a mainstream technology is taking quite some time.

While there is near universal acceptance of the importance of IoT, there are also people who have not embraced IoT in its entirety. Many organizations are yet to establish a clear picture of the benefits IoT can deliver. The second set of hurdles are the organizations themselves. Also, Internet is not yet available in many parts of the world – this not only includes developing countries but also parts of Northern Europe and USA.

Data security is a major concern. Data privacy and security measures need to be absolutely taut and effectively implemented.

The ROI upon implementing IoT is hazy; as mentioned before, Internet connectivity has to be ubiquitous which in turn calls for significant infrastructure investments. However, until the revenue potential or cost savings is clear, the hesitation is inherent.

According to a Gartner study, industry adoption varies widely. Heavy industries such as utilities, oil and gas, and manufacturing lead adoption, while service-oriented industries lag behind.

For banks, IoT will deliver an unprecedented level of data and data-driven customer insights. This will enable banks to provide their customers, both individuals and businesses alike, with a truly bespoke experience, with advices and offers that reflect the day-to-day events in customers’ lives.

Today, increasing hyper-connectivity is generating colossal amounts of data about people, devices and processes. The IoT goes a step beyond harnessing big data; it extracts insights through analytics by making the information readily available and consumable for other systems and networks in real-time. It acts as an intermediary platform that helps transform information into a force that can boost efficiency, increase productivity and drive fundamental improvements in customer experiences.

IoT captures the connectivity of the digital economy for consumers and organization, through supply chains and across geographies and is visibly having a profound impact on all industries. The time to respond is here and now, especially for the banks.

Bank of Things (Internet of things for banking) will transform banks if executed effectively. Creating an intelligent environment in banking will improve several KPIs – detect overspending for customers, improve stickiness and satisfaction and many more.

From banks’ context, banks can now have their credentials in the consumer’s refrigerators, which is connected to the Internet. In this route, the consumer pays for groceries through the refrigerator. The customer can be incentivized by using the bank’s app to make the payments ultimately. This improves customer stickiness and in turn the customer satisfaction (CSAT) scores.

Another example: Intelligent analytics can be provided to a consumer (similar to a Fitbit dashboard) for their coffee maker. They can see know their coffee consumption, the financial benefit of operating their coffee maker versus buying their Americanos at Starbucks and maybe also feed the nutritional information into their fitness plan on another platform. Providing unit-level out-of-the-box analytics is a consumer benefit that extends the value of the product.

Banks are generally lagging behind other industries, and are also facing serious threat from fintech startups. Change is essential, but banks are treading very carefully and are being extremely cautious with change. This long-standing status quo is simply unfavorable in today’s connected world of tech-savvy consumers. Maximum results are assured if banks are able to augment their business capabilities by leveraging technologies such as IoT.

Today, it is all about disruption and adapting to changes quickly and going beyond the comfort zone to keep customers happy. Using IoT-enabled technology to provide a more convenient and rewarding experience for the bank’s credit and debit card customers is one popular use case. For example, banks can provide lifestyle apps in addition to banking features to their customers. Customers can get shopping offers on their mobile phones, alerts on their smart-watch when they exceed spending limits and even share their experience on social media to keep their friends and family updated.

Bank of Things – A few compelling business cases

Leveraging the below mentioned ideas could revolutionize several areas in banking that currently involve manual steps for sign-offs and cause delays in processing.

Use case 1: Extend to wearable devices

Apple Watch Icon

Banks can extend a very important requirement like updating real-time customer balances to their watch

Customers can easily keep track of their debits and credits and view balances on their watch, without having to bother navigating the bank’s web portals or apps.

Use Case 2: Fraud Prevention

Credit Card

Through the bank’s mobile app – The geo-location data can be fetched from the user’s mobile that can be used in real time for Fraud prevention

The user’s device location data can be matched with the transaction location at the POS (point of sale). If it matches, the transaction can be approved – all in a matter of milli-seconds

Use Case 3: Deriving insights by location

Leverage ATM & Map

Banks could examine the frequency of ATM usage within a certain area / location.

This would enable banks to target specific zones for ATM installations where foot-fall is highest.

Use Case 4: Auto-debit exact fare based on proximity to a Metro station

Apple Watch, Customer walking towards a metro station

A customer’s wearable technology can be leveraged to auto-debit the exact fare, when it detects their proximity to a certain Metro station.

The banking app on the wearable will simplify payments and at the same time provide the customer with real time information on the amount paid and the remaining balance in their account.

Use Case 5: Contextual commerce

Cluster of grocery items + Bank graphic

Banks can tie up with companies that can help build connected devices that would detect consumable usage of day-to-day items such as detergents, cereal, pet food, shampoo etc.

Once the usage plummets beyond a certain threshold, an order can be triggered using the press of a button. This can be possible using the device’s replenishment service APIs. Such a feature would be a win-win for banks, merchants and consumers alike.

Use Case 6: Cross-sell/ Up-sell

Bank branch + wireless beacon

Cross selling/upselling to customers using beacons by identifying them as soon as they step into a branch.

Banks can also track customer footfall and change engagement strategy using insights.

Use-Case 7: Leveraging Beacons to improve Customer stickiness

Bank branch + wireless beacon

The above feature can be extended to multiple devices that today’s connected customer uses, to transact in several areas such as – pay for movie tickets using a mobile phone, pay telephone bills using a smartwatch and replenish groceries using their smart-fridge

Banks can track customer footfall and change customer engagement strategy accordingly by making use of insights.

With benefits like these, the use of analytics-based reward programs is becoming a key differentiator for banks. This can help them to come up with a target strategy for certain customer segments to better proposition products/services, to help boost KPIs such as customer stickiness, improve bottom line et al.

The possibilities are clearly endless.

Challenges for banks:

One of the major challenges holding the banking sector back in this area is that posed by legacy IT infrastructure. The lack of customer pressure in the past had given banks little reason to change their setups; but now, widespread significant remodeling is required to simplify cumbersome systems and ensure that new technologies can be deployed effectively. Driving change is also particularly pressing for banks given the current sector environment, in which an increasing number of challenger banks who can and are taking advantage of advances in technology are gaining regulatory approval.

Exploring the possibilities in IoT are endless. Banking as a Platform (BaaP) is an example; The landscape of financial services changing in terms of both delivery and integration as new avenues, channels, products and partnerships are being explored. With so much disruption, owning an entire business stack is neither feasible nor desirable. Hence, banks can be empowered to enhance their digital offerings using a connected ecosystem of secure third party apps and services. Platforms allow users to create and consume value offered by banks. Financial services would serve as an underlying infrastructure (upstream – by creating value) and enable users to interact with each other (downstream-where users consume and create value)

Change is inevitable if the banking industry is to keep up with the intelligent devices and communication technologies that are paving the way for next-gen businesses. Banks that get ahead of the curve in their technology adoption today to improve customer experience, engage their audience and boost productivity will be tomorrow’s market leaders.