Image from iStockPhoto/ijeab
By Jayajyoti Sengupta, Head, Asia Pacific, Cognizant
IoT is already influencing the latest wave of digital transformation, or Digital 2.0. Banking, Financial Services and Insurance (BFSI) organizations need to work quickly to leverage IoT technology and reap its benefits. At the same time, business leaders will need to drive IoT development in tandem with data security and privacy, especially since the quantum and value of data is rapidly increasing across the banking value chain.
IoT is becoming increasingly commercialized and mainstreamed, making it easier for BFSIs to leverage the technology to meet consumer demand for digitally-enabled services. The end result will be richer, curated customer experiences across multiple touchpoints.
IoT driving big and thick data
The key benefit of integrating IoT devices into the workflows and digital business models of BFSIs is in the generation of big data and thick data. “Thick data” here refers to ethnographic and human behavioural data.
In combination with AI-driven analytics and machine learning algorithms, big and thick data can be combined to reveal deeper insights into customer intent and needs. This will lead to micro-segmented customer groups that can be more specifically targeted to make their experiences even more personalized.
We’re already seeing sustained experimentation and value discovery around such IoT applications. For example, a major credit card network working with Cognizant is using geolocation (mobile data) and other sensors (biometric) in credit and debit card transactions to enhance security.
Additionally, BFSIs can adopt “platform thinking” that provide value-added, one-stop experiences for customers. For example, smart car IoT data can be shared with insurance providers on open banking platforms to make insurance journeys automated and thus more convenient.
Enter the Internet of Payments
With the growing number of digital payments channels (mobile point of sale, near-field contactless, wearables, etc.) and the surge of smart devices and applications, consumers increasingly expect digital experiences to augment their physical settings. In addition to one-click or type-and-swipe access, consumers look for fast, convenient, personalized service at every touchpoint.
This presents an opportunity for BFSIs to integrate IoT into payments and consumer banking. This trend of integrating IoT into payments is dubbed the Internet of Payments.
The possibilities are endless with the Internet of Payments. For example, long queues at the cashier can potentially be eradicated. Consumers could use cloud-based apps on smartphones to scan purchases in-store and even pay for items before they enter the store.
Additionally, smart ATMs can also leverage IoT to improve user experiences, boost security, and provide advanced analytical capabilities. New services can include location-based messages or offers, wearables-based customer authentication and even predictive maintenance.
Overcoming the security and privacy hurdle
However, a key practical challenge in integrating IoT technologies is in security and privacy, such as the potential for exposing sensitive personal information, as well as device spamming or hacking. IoT poses some real risks to consumer privacy, including greater security exposures due to data-sharing across all connected devices, or the real risk of personal information falling into the wrong hands. BFSIs must take the necessary measures to ensure consumer confidentiality and security.
Businesses must consider data privacy in tandem with IoT implementation, not just to comply with laws such as the General Data Protection Regulation (GDPR), but also to build and sustain consumer trust in the brand.
Rather than looking at this challenge as a burden, the need to ensure data security and privacy is actually an opportunity for businesses to generate more revenue streams. Services such as tokenization, electronic identification and fraud detection can help consumers gain trust in digital banking and financial service offerings.
On the back-end, integrating IoT data with other Digital 2.0 technologies such as private blockchains can help to secure, verify and share data, to break through data silos across business units.
A balancing act to delight customers with IoT
At the core of the “bank of the future” is the creation of hyper personalized customer journeys. IoT is shaping up to be one of the most influential technologies of Digital 2.0, due to its ability to generate large pools of big and thick data – vital to creating tailored customer experiences.
However, the integration of IoT technology will prove to be a major balancing act. Digital acceleration will require a tighter focus on governance, as well as a conscious reshaping of the human workforce and related skillsets. At the same time, BFSIs need to determine the right balance between human and machine intelligence, because the human touch will prove to be a perennial customer need. Data security and privacy will also need to be ensured simultaneously.
For BFSIs, incremental innovations and progressive value discovery might prove to be the most effective way to sustainably and responsibly accelerate toward fully digital business models. Success will be driven by a clear leadership vision that steers commitment to customers’ needs above all else – be it in their user experiences or personal data privacy.