The Internet of Things (IoT) is transforming many sectors, but what can it do for the financial services sector?
The world of finance often deals in intangibles – risk management, exchange rates and (these days) money. So, the idea that something physical such as IoT could revolutionise the financial services industry, as it is doing to many others, seems something of a leap, but that’s exactly what the next few years may well bring. They will see the industrial internet of things (IIoT) market emulate and even surpass what’s already happening in the consumer sector.
The future is now
In many ways, the future is already here, certainly for consumers. In the insurance sector, for example, many companies are already using telematics to provide more information about how someone drives their car.
There is, though, also considerable untapped potential in IIoT. These are generally used in manufacturing, logistics and for other business applications. It brings in machine learning using big data gathered from physical sensors in multiple locations and has exciting potential in areas such as stock control, supply chain management, traceability and environmental or green practices.
They are also being used in more hazardous areas, such as building sites and in offshore oil and gas rigs where monitoring the condition of equipment in deep water has always been difficult. Sensors can monitor the condition of pipes, check liquid flows and identify issues before they become critical. They can improve productivity, reduce operational costs and, most importantly, prevent disasters such as the Deep Water Horizon.
The market is still nascent, but it’s already growing quickly and has huge potential in the future. According to IndustryArc, the market will reach $123.89bn by 2021 with manufacturing leading the way.
WiFi data can track customer flow around a retail outlet telling managers where they spend the most time and where to position their best-selling products. Helsinki Airport, meanwhile, used WiFi sensors to track smartphone signals and detect how people were moving through the terminal. Their intention, they said, was to identify bottlenecks and reduce waiting times, but it could just as easily be used to optimise their retail offerings.
The near term uses all have a tangible unit to measure and way to capitalise on it. However, many of the longer-term uses will be a little less tangible and harder to quantify. Banks may be looking at ways to monitor the performance of their transactions or operating profits, but while these don’t have their roots in the physical world, they do draw on some physical interactions. If you’re a logistics operation, for example, your stock price and profitability may depend on how quickly you are moving equipment from one place to another.
For the customer, sensors could let them know about movements in their account balance or stocks. For example, imagine a card which could raise a small alarm if you went over – or approached – your over draft limit. As we stretch further into the future, FS companies may even be able to monitor people. Wearable technology is yet to take hold, but as it does it can monitor everything from our diet intake to our health, all factors which could be used in the healthcare and insurance sectors.
The IoT, then, is like a great untapped well. Most of the gains are all potential and there’s no sure-fire way to be certain about what impact it will have. Few experts believe it will have transformed the sector within the next few years, but the further we move into the future, the more opportunities it can bring.