Spurred onward by COVID-19, the financial services industry is now diving into its third wave of digitization. In the first wave, companies adopted scattered digital initiatives, like using optical character recognition to digitize information and close performance gaps. In the second wave, companies formulated digital strategies and embarked on end-to-end digital transformations.
The COVID-19 pandemic accelerated the third wave of digitization in financial services. With consumers and employees alike often quarantined and isolated due to public safety considerations, business has shifted to digital channels by necessity. Now financial companies are looking to seize competitive advantages and improve omni-channel customer experiences by using automation and real-time analysis of big data. IoT can help financial services firms achieve these goals.
US $670 billion
Size of the industrial IoT market by 2023, according to BCG analysis.
For example, consider the ways in which IoT could allow banks to embed video analytics capabilities into ATM security cameras. Using such analytics, ATMs can adjust their security parameters or user interface according to assessments of each user. Such analysis has the potential to humanize the transaction, for instance by enlarging the text size to improve legibility for an elderly customer. On the flip side, if the ATM customer is wearing a helmet or some other type of face covering, the machine could add more security parameters to authenticate the user’s identity.
With IoT, devices themselves can serve as payors. For example, a connected car could ‘talk’ with a fuel pump at a gas station and make the payment automatically on behalf of its driver. The connected car could also handle payment transactions for food ordered at a drive-through restaurant.
Similarly, an IoT-enabled bus could communicate with passenger mobile phones to detect when a rider boards the vehicle, how far she travels, when she disembarks, and how much to debit her account. The whole transaction could take place in the background without the rider needing to lift a finger. Several large banks have already begun partnering with technology partners to test and launch just this sort of IoT-based automated payment system.
Financial Services firms can achieve success with IoT by focusing on 5 key LASER factors:
- Leadership: Have senior, influential leaders sponsor the IoT program. These leaders should make sure that teams working on IoT are aligned across functions and are held accountable for reaching clearly defined success metrics.
- Alliances: Build partnerships and choose allies based on both technological and business considerations.
- Scalable architecture: Invest in the scalable architecture, security, and IT/OT integration technologies needed to support IoT initiatives.
- Engineer business processes: Rewire core business processes and assemble multidisciplinary teams to execute and capture the full value of IoT.
- Rationale: Take a value-led approach to prioritize projects with a strong rationale, a viable business case, and a clear path to value.