Advantages (and Disadvantages) of Fintech-Focused IoT
Not long ago, the only portal online was through a stationary, boxlike screen. But times have changed. Today, the list of connectivity-capable devices stretches on almost indefinitely. Everything from automobiles to appliances, to entire buildings themselves are now woven into the world wide web. We’ve created a digitized superstructure — called the “Internet of Things (IoT),” — that spans entire industries, fundamentally rewiring the way they operate. Central among them is the financial sector, which stands to benefit greatly if innovators can harness the value (and counter the risks) of IoT in fintech.
Advantages of IoT in Fintech
Real-Time Data Collection: The ability to remotely evaluate insured property is especially useful to companies and clients alike. Systems of sensors in connected homes, for example, can send detailed coverage information, options and updates directly to a dedicated smartphone app, regardless of the client’s location. This precise monitoring can ensure fair policy pricing and accurate claims.
Better Customer Service: IoT-based solutions in banking stand to streamline and personalize customer experience. Together, IoT and fintech can speed service and bolster security; for example, a bank could install sensors on-site that connect with fintech apps to authenticate customers’ identity, while also seamlessly managing service requests.
Quick Decisions: By compiling a detailed profile of customers’ financial history, habits, and risk factors, IoT could help expedite lending decisions. Coupled with sophisticated analytics tools, IoT sensors could rapidly comb through credit histories and social media activity to determine customer creditworthiness, and generate ideal offers.
Easier Payments: Contactless payments — in which customers wave smartphones, cards, key fobs, or other RFID or NFC-equipped devices over a point-of-sale reader — have taken the UK, Australia and Canada by storm. However paying contactless requires customers to be in close proximity to a sales terminal. IoT solutions could potentially surpass this limitation, allowing customers to bypass the checkout line and pay — via fintech apps — from anywhere in the store.
Effective Interaction: Interaction between IoT sensors, apps, and customers could be tailored to encourage better money management habits. For example, if a customer that has a history of forgetting credit card payments (and being penalized with late fees) passes by an automated sensor, and they have an unpaid bill due that day, they might receive a reminder to pay. In another potential scenario, a customer that typically overspends might use fintech that interacts with store-based IoT to warn customers before they make purchases over budget.
Disadvantages of IoT in Fintech
Lack of Security: By its nature, IoT involves communication between a vast array of connected devices which utilize unique software, often with differing security levels. Hackers can capitalize on this lack of uniformity; weak security systems within one IoT-equipped device could potentially put personal information stored across the entire network at risk. Security solutions for IoT are under development. Many current iterations carry a high price tag, and implementation can be a challenge.
No Uniform Standards: IoT software is developed by various companies, and programs are not all mutually compatible. Some devices may simply be incapable of communicating with specific apps or programs, which can be a headache for consumers.
Complex Networks: The larger the network, the more difficult it is to maintain, and IoT is no exception. Maintenance is tricky, as an ill-conceived solution could potentially cause a plethora of new issues. It’s important to carefully screen both manufacturers and asset managers, as those who lack IoT experience can unleash catastrophe across a network.