The Internet of Things and digital banking
One of the predictions we made in our recent report, 10 Things Digital Banking Teams Should Be Doing in 2017, was that ‘IoT’ (or, the Internet of Things) will have a big influence on banking in the coming year – and, of course, beyond. But what does that actually mean?
The phrase ‘Internet of Things’ has been around for a while, most often associated with something I’ve never seen in any kitchen: a smart fridge that automatically reorders the consumables you run out of. The concept of IoT is that, SOON, we will not only have specific devices connected to the internet – phones and computers – but EVERY device will connect to the internet, and to each other – from our watches to our appliances (think smart scales and connected cars), and the stuff we own will share our information with one another in a way that improves and simplifies our everyday lives.
Also referred to as M2M or machine-to-machine connectivity, the Internet of Things ‘revolution’ is in its early stages, but is set to change the face of banking as much as any other industry. But how? (And what does Adele have to do with it?*)
Hello from the other side…
The first step appears to have been the emergence of the virtual assistant. At Mapa, we’ve loved experimenting with Amazon’s Echo and Google Home, products that sit in your home (or office) and just do what you tell them. And we have already seen Capital One in the US making it possible for customers to pay their bills via Amazon’s Alexa (the virtual assistant on Echo). Capital One is certainly not going to be the last bank to do this.
These household helpers are likely to come into their own as more and more devices and appliances are ‘connected’, thanks to improved software and cloud-based services.
Research Manager Chris Ward comments: ‘Cynics might look at IoT and suggest consumers won’t buy into it, but the reality is that customers are becoming ever more ready to use digital services for everyday tasks, especially when they are offered by the digital brands they trust, such as Apple, Google and Amazon.’
The uptake of connected everyday objects leads to the creation of huge amounts of data, to help brands – like banks – better understand, segment and target their customers. It also helps financial providers get closer to consumers, where someone will surely become the first and best to facilitate the fast, frictionless payments that the IoT revolution demands.
Should I give up, or should I just keep making payments?
When your fridge is smart enough to suggest and order food based on your consumption and preferences, and all devices in your home and office can make transactions on your behalf, what does that mean for banks? The question is who will bravely and boldly take ownership of customer engagement. There is an opportunity for banks to become a central portal for IoT; a key platform where customers can monitor and understand their spending across every internet-enabled tool they have.
American Banker suggests that ‘A good experience would incent the customer to use a bank app for this [IoT payments] rather than a built-in payment system. Loyalty programs could flow through such an app, and the bank could collect data that could be used in marketing and customer service.’
Visa and Mastercard have already announced their intentions to be part of this payments eco-system, allowing basically any household object to be ecommerce-enabled.
We could have had it all…
The possibilities for banks, if they are in a position to collect data from these smart connected devices, are pretty exciting. The world of insurance will be changed as brands collect information from connected cars and wearables, understanding more than just usage patterns but also the risk associated with particular customers.
Where cars are connected to payments, banks will learn what type of car a customer drives – and will be able to offer financial products that they are more likely to require and enjoy. A voice-controlled banking app for the car is surely on the way.
Any discussion of IoT is half-formed if you don’t also mention beacons – ways to collect information from connected devices as customers are out and about. Banks can use this technology not only in-branch (how long has someone been waiting in line, greeting customers when they arrive) but alongside geolocation data to alert customers to relevant local offers; to tell them they are pre-approved for credit, a loan or car finance; or even to cross-sell mortgages from signals built into property For Sale signs.
You may have my number, you can take my name…
Notwithstanding the creative examples that have popped up in the digital banking and technology press, banks should be firstly considering how they can use new sources and repositories of data to personalise and enhance the customer experience. Being able to analyse and track customer behaviour across so many connected devices should let banks better meet ‘unmet needs’ and help customers with saving, offer advice on investments and make context-aware spending recommendations, and even use the increased data as a way to protect their online security. This, in turn, could help banks manage their risk and reduce costs.
Never mind I’ll find someone like you…
Vulnerability is likely to expand with the increasing number of connected devices (or entry points for hackers) – especially if we want a seamless experience between them, we increase the risk of exposing a world of our personal data to cybercriminals.
But the ubiquity of the Internet of Things can also be useful for security: Authentication could be made possible as banks (and other brands) use our behavioural data as a way to identify us (with less effort on our parts) and spot unusual activity.
It is possible this ‘pattern-of-life’ data will be used to assess the risk or credit worthiness of individuals. Obviously, there is some risk to customer privacy – if the stress in my voice is used to denote a risk to my health and thus my insurance premiums are adjusted upwards, I would be right to feel a little perturbed.
‘The beauty of the IoT is that, being grounded in data, it can learn and adapt to each customer’s individual behaviours over time so that it’s always relevant, always accurate, and always personal. In terms of a customer service tool, this is potentially revolutionary.’ Mike Laven, CEO, Currencycloud
*Singer/songwriter Adele has nothing to do with IoT and banking, really, but *we* are well placed to offer consultancy to financial services providers – contact Mapa Research today for more information.