Internet of things is first spelled by researchers at the Massachusetts Institute of Technology 1 which connects objects in the real world by using the Internet so that they exchange the data for taking actions based on events. IoT exists anywhere in the environment at any time within any context and anybody can access across any business 2.
The devices connected with IoT will be more than 200 billion devices according to Intel and 212 billion devices by IDC by 2020 3.The device connected can be any tangible devices such as cars ,computers, printer, tablet, smart phone, fridge embedded with sensors technology and intangible devices such as software, database, webpage, text document etc. having unique identification 4.
Banks are mostly relied on depositing and withdrawal of money to provide security and to give interest on deposit for the money deposited for the customers .The connected objects are increasing in more sectors such as smart city, smart home, industry, agriculture, retail sector, medical sector but it needs to be connected in the banking sector to perform banking operations in order to explore new services to satisfy customer needs5.
The banking in IoT industry is now in the adolescent stage, started using IoT functionalities for improving banking operations. Banks are increasing under pressure to connect customers with other services such as retailers, insurance providers, health practitioners, airlines, and hotels to deliver tailored offering that meet customer needs and life styles6. A survey was conducted to find how much IoT technology is used in Banks. The survey shows that 64.5% is used by banking executives globally through smartphones tablets and other digital devices. Additionally 3.6% is used to monitor retail bank branches , 21.1% is used to gather product performance data by using digital sensors and 15.8% is used to track customer product usage by IoT sensors in wearable7
This paper reveals about how banks use IoT in offering new services to satisfy customer needs .Section 2 describes about the working of IoT in general, Sections3 describes how IoT can be used in Banking, section 4 describes about the devices used in IoT banking, section5 describe about the challenges that has be faced when IoT is used in Banking.
2.Working of IoT
The internet of things is a system of interconnected devices or objects or people having unique identifier and has the ability to exchange information over network without requiring human interaction. The whole IoT system consist of four modules: sensors/things, Communication, data processing, and user Interface 8
Sensors is a device which detect changes in the environments and collects information from the environment. The IoT sensors can be smart sensors, actuators or wearable sensing devices.
For example smart phone is a device having multiple sensors such as camera, accelerometer, GPS. So data to be collected from the environment is deployed with sensors. For example, in order to finder the number of customers entering into the bank can be detected by installing motion sensors in the bank
Once the data collected from the environment are sent to cloud. The sensors or devices are connected to cloud by different communication technologies such as Wi-Fi, Bluetooth, LPWAN or by directly connecting to the Internet.
Once the data gets to the cloud, software performs some kind of processing on it. The collected data is analyzed to take specific actions based on required services. The data processing may be very simple or complex. For example, paying a toll bill ,or identification a customer entering into a bank
Next, the information is made useful to the end-user in some way. This could be via an alert to the user (email, text, notification, etc). For example, a text alert when the customer exceeds bank balance while spending money. Also, a user might have an interface that allows them to proactively check in on the system. For example, a Bank manager may check the operations happening inside the Bank via a phone app or web browser , when he is outside the Bank.
Depending on the IoT application, the user may also be able to perform an action and affect the system. For example, the user might remotely switch on the house in his house via an app on their phone. And some actions are performed automatically and can send relevant alert to authorities.
3. Applications of IoT in banking
IoT can create new device to device connections that have the potential to interrupt banking in a few areas. Listed below are some of the uses that may be adopted in banking in a time span ranging from near-term to long-term.
3.1 To provide reward for debit and credit card customers
The use of IoT-enabled technology to provide a more convenient and rewarding experience for their credit and debit card customers is one of the most-cited examples; The number of people entering and leaving in an ATM can be found by identifying the foot traffic in the ATM by placing sensors using IoT technology in a certain zone to find out more ATMs are needed for that area or to remove the ATM at that Zone 9.
3.2 ATM monitoring
IoT provides security to the ATM machine by placing sensors around ATM and monitor it. The parameters such as movement around ATM machine, change in temperature, any additional noise or sound , power fluctuation can be monitored. If there is any change in the above parameter above the predefined level ATM can programmed to lock down the ATM door or to provide an alarm to the nearby police station 5.
Bank customers are identified by their signature during banking operations , But using IoT customer can be recognized biometrically by using biometric scanners such as retina and finger print scanner when an customer enters the bank and provide OTP (preference)number for performing banking operations 5
3.4 To create personal budgets
Banks can monitor the customer spending habits from customer smart device such as smart car, smart meter, wearables and also from gathering customer bank transactions and create personal budgets. Thus customer spending pattern such as saving, deposits can be analyzed to estimate month end balance to optimize their profits while making customer free feel more comfortable5.
3.5 Improved customer service
Sometime customers will spent more time on specific bank operations. So sensors can be installed for each banking operations queue which is connected to IoT technology to identify more time spent for specific operations. So by identifying time spent on each operations, Banks can provide better service to the customer by providing additional staff to such services 5.
3.6 Financial Planner
Sometime customer may need huge money for unexpected expenditure for that the customer spending patterns can be analyzed by using artificial intelligence to identify in which form the money can be saved for unexpected and future expenditures for each month. Thus IoT banks will be able to analyze and deliver relevant solutions to make financial sound decisions.
Similarly when a customer spends more money or exceeding customer balance a message can be sent to the customer smart device or an alarm/vibration can be raised to the customer wearable indicating financial risk of customer. Thus IoT banks can pay more attention to the customer for safe usage of money and free from financial risk.
3.7 To identify offers
When an customer swipes his debit/credit card in an supermarket, the offers that are provided by the nearby trader can be pushed to the customer smart phone by collecting the geographical data of the customer. Data from the connected device can be used to build a profile for the cardholder by estimating his spending habits, which could be used to find abnormal payments by the cardholder , so that necessary authentication can be provided before transaction of abnormal payments or large payments 10.
3.8 IoT powered shop
When a customer purchases an item, the item can be automatically paid to the retailer when the customer leaves the system. For example, in a supermarket, when the customer have purchased all items, before leaving the shop, IoT enabled smart device can be connected to the bank of supermarket and payment can be made to the purchased product 11.
3.9 Shipping and International Trade
Iot can be used for shipping and International trade , with biometric and positional sensors12 collecting real time geographical data about the shipping products .This makes business more efficient and perhaps allow payments to be made faster , when the shipment reaches the destination..
3.10 To purchase Asset: Deliver Loan proposal
When a customer wants to purchase higher value items such as car or furniture, loan proposal can be delivered to the customer smart device, when the customer enters the showroom by using IoT technology by linking the customer with his bank OK for his loan approval if he wants to purchase the products with bank loan 10.
3.11 Car Banking
Cars installed with IoT Devices can be connected to Bank account. Thus cars can be used as an payment channel for car parking, toll gate payment, paying garage fees, paying fuel stations without the intervention of human by running an app while parking, fuel filling, passing toll gate 13
3.12 Smart Enabled Apartments
When apartments are built with embedded IoT technology connected with banks, when a new owner takes up the residence, payments can be made for the housing loan, utility bills, automatically re-ordering milk etc..11.
3.13 Monitoring Agriculture
When IoT is employed in farms and connected to banks, allowing farmers and banks to continuously arise and value the farm crops , calculate the yields, so that banks can provide financial decisions where the crops can be sold for better profit 11.
4. Smart Devices involved in IoT Banks
Today everything is connected either wireless or wired up. Some of the IoT devices such as Embedded sensors, gadgets, wearable’s ,Core Banking Apps on smartphones, Personal Banking Pods, Security Keys and Card readers, Digital Assistance , Finance Tracking Apps, Contactless Payment Desks, IP locations all these are combined with Internet will allow to access the things in the world and help the banking and finance industry to get more benefits14.
Wearbles or wearable devices are electronic devices that can be embedded into items or accessories worn on body .They can do tasks like computer or mobile. Wearable devices have been the easiest method for payment in banks. Wearables can be smart watches, wrist bands through which banks can be connected to the customer and payments can be made through wearables. Banks can provide an application for wearable devices to allow contactless wearable payment solutions15.Wearables can also be used for quick balance enquiry , promotion notification on new features,to provide transaction alerts ,real time receipts, mini statements, purchase of stocks etc. Wearable device are becoming better than smart phone because they are pervasive . Banking Apps can developed for wearable’s to provide more value added service to the customers 16,17. For e.g. major banks in India like SBI and YES Bank have rolled out smart watch apps which can help users with information like tracking transactions, account balances, mini statements, ATM locations, etc. on the go17.
Authentication is important for banking transactions. The customer can be authenticated by using ECG of a customer via wearble to withdraw money providing more security 18 to the customer . Banking experts argue that wearable’s may even replace mobiles and become more common for carrying out banking transactions19
4.2 Smart phones
Mobile devices such as smart phones and tablets are mostly recognized applications of IoT in banking industry. This allows simple communication between the customers and the banks 20. Mobile apps can be installed in mobile phones and tablets which help to improve secure payments21.
A survey conducted by BI Intelligence Digital Banking shows that 64.5 % of banking officials monitored their clients through portable applications on smartphones22.Banks can also identify customers by incorporating sensors at the entrance of the banks which recognise the customer based on the electronic devices installed in the mobile phones23.
4.3 Connected Car
It is estimated that 90% of cars will be connected to the internet by 2020 as compared to 10% in 2012 24. Cars can be linked to customer’s bank accounts, so that when there is need for payments of service which can be done using Iot Technology with the help of apps13,25.
4.4 Smart sensors
Digital sensors can be placed in physical units like in bank branches and ATMs to analyze consumer behavior. The digital sensors can be used to find unexpected customer problems related to finance, service issue, comfort in using ATM and other automated machine.1
The digital sensors built with artificial intelligence having unique identification connected through Internet and with banks forming IoT technology can be used to order any products or items when there is out of stock in house hold items and at the same time payment can take place flawlessly in the background and the product can be delivered on time. In retail stores sensors can be placed near the checkout counters, so that when the customer leaving after purchase , payment can be initiated 2
Sensors can be used to track the goods shipped to check the goods reached the destination on time so that payments can be made faster .So sensors can be used to track real time data in shipping and international trade3
With the help of sensors , it is also used to monitor the state and conditions in agricultural businesses, which helps the farmers to provide more loan options by the banks4.
IoT in banking is a revolution , but when it is implemented in real time there exists numerous barrier that must be overcome . Numerous serious concerns must be taken into account when IoT devices are connected to Banks .
The introduction of IoT solution in Banks , faces serious security challenges and risks. With more number of devices connected to the banks, banks become the easy targets for the hackers. Data generated by the customer during transactions goes through the network must be protected by smart solutions such as encryption, authentication tools, biometric verification . Banks must also provide increased level of authentication and authorization to maintain the customer trust
5.2 Current Barrier
Limited cellphone and internet coverage in rural area, low rate of return from investment, skilled person required to install and maintain the computer and ATMs in diverse locations. Other problems associated are sending cash from urban to rural areas includes cost, theft and loss , protected from money laundering and time delays.
5.3 Big data
More number of devices are connected to the banks which is expected to create Bank of Things. Thus Banks can collect data from any device or machine including personal data from device and M2M data from any device to offer different services to customers. This leads to generate more amount of data which must be transfer to the cloud for processing. The data generated must be moved to the cloud needs more bandwidth and more storage. This is a serious problem which dumps more data in cloud, which need preprocessing techniques and data analytics to store only the relevant data needed for further processing. For example the data collected from ATMS can be analyzed to understand which area need more ATM installations or location changes. So handling Big data must be identified to reduce operating costs of IoT technology in Banks and increase the revenue for the banks and thereby improve customer experience.
Banks collect information from customers to provide services and but the customers face privacy issue. The privacy problems increases, since the data is not only collected from bank accounts, but the data is also collected from smart home devices, cars , smart phones etc. and these data are not only used for proper financial transactions, but they are also used to provide better services , gain saving and they are shared with third parties. So the customers are more concerned about the privacy and confidentiality. So banks have to provide proper measures to protect the data and asset of their customers.
Interoperability is fundamentally valuable from the perspective of both the individual consumer and Bankers user of these devices. Customers use a variety of IoT devices for banking operations, which leads to interoperability between devices for sharing information . This occurs because of the use of different manufactures of IoT devices , different operating system used by the IoT devices, different version of IoT devices, and different or inconsistent communication protocols used26 . Thus there is a strong need for standardization for the exchange of information between IoT devices and also for interoperability of devices from multiple vendors.
Thus there is a strong need for standardization, that enables the semantics being conveyed and understood, and also for interoperability of devices from multiple dealers.
Many number of IoT devices will be connected to banks which provides customer easiness in using Banks. So Banks must identify customer interest and then the technology required to meet the customer requirements must be implemented. Modern Banking architecture must be built to manage the complexity and level of uncertainty to support real time access to banks and flexibility in using IoT banks.
The use of IoT in Banking technology for payments will reduce problems that generally occur when using cash , such as fraud, forgery, money laundering and theft. Thus IoT is a great way for banks to transform data into insight to better understand the customers and eventually deliver a better customer experience.
1. https://www.westpac.co.nz/rednews/digital/the-internet-of-things-banking/ , The Internet of Things – Banking
2. The Internet of Things – Banking, Infosys Whitepaper
3. https://www.forbes.com/sites/jacobmorgan/2014/10/30/everything-you-need-to-know-about-the-internet-of-things/#4b934b943ae7 , Everything You Need To Know About The Internet Of Things
4. Daniel E. O’Leary(2013), ‘BIG DATA’, THE ‘INTERNET OF THINGS’ AND THE ‘INTERNET OF SIGNS’. Intelligent Systems in Accounting, Finance and Management.20(1), 53-65
5. http://www.davranetworks.com/news/the-internet-of-banks-how-banks-can-leverage-the-internet-of-things-to-improve-security-and-better-s, The Internet of Banks: How Banks can Leverage the Internet of Things to Improve Security and Better Serve Their Customers
6. https://www.finextra.com/blogs/fullblog.aspx?blogid=11676, Banking on The Internet of Things IoT
7. https://thefinancialbrand.com/63285/banking-internet-of-things-iot-data-analytics-payments/, Should Banking Build an Internet of Things (IoT) Strategy?
9. http://www.bankingtech.com/2015/07/how-the-internet-of-things-is-helping-banks-put-their-customers-first/ , How the Internet of Things is helping banks put their customers first
10. http://www.bankingtech.com/2016/08/iot-and-the-banking-revolution/http://www.bankingtech.com/2016/08/iot-and-the-banking-revolution/ , IoT and the banking revolution
11. Enabling the IoT : Why banks should be part of IoT, Universal payments UP,Whitepaper
12. https://www.finextra.com/blogposting/12707/how-the-internet-of-things-will-change-banking, How the Internet of Things will change banking
13. https://www.maxbytetech.com/iot_banking/, IoT in Banking
14. https://www.konstantinfo.com/blog/how-iot-can-help-the-banking-industry-grow/, How IoT can Help the Banking Industry Grow?
15. https://www.stoodnt.com/blog/scopes-of-internet-of-things-iot-in-the-banking-and-financial-services-iot-impact-on-fintech/ , Scopes of Internet of Things (IoT) in the Banking and Financial Services
16. Wearble device in Banking, white paper, https://www.infosys.com/industries/financial-services/white-papers/Documents/wearable-devices.pdf
17. https://www.robosoftin.com/blog/wearable-technology-in-fintech/ Wearable technology in Fintech & 5 tips to build successful Wearable solutions
18. Wearable banking, https://www2.deloitte.com/content/dam/Deloitte/us/Documents/process-and-operations/us-cons-wearables-in-banking.pdf
19. https://letstalkpayments.com/iot-in-banking-exploring-exciting-opportunities/ IoT in Banking: Exploring Exciting Opportunities
20. http://www.k-message.com/iot-financial-services-bank-marketing-definition-examples/ IoT in Financial Services and Banking – Definition and Examples
21. https://letstalkpayments.com/iot-in-banking-exploring-exciting-opportunities/ IoT in Banking: Exploring Exciting Opportunities
22. https://www.konstantinfo.com/blog/how-iot-can-help-the-banking-industry-grow/ How IoT can Help the Banking Industry Grow?
23. http://www.davranetworks.com/news/the-internet-of-banks-how-banks-can-leverage-the-internet-of-things-to-improve-security-and-better-s The Internet of Banks: How Banks can Leverage the Internet of Things to Improve Security and Better Serve Their Customers
24. http://www.nerdgraph.com/rise-internet-things/The Rise of the Internet of Things
25. .https://www.edgeverve.com/finacle/finacleconnect/trulydigital-2017/iot-banking-enabling-banks-digital-future/ , Banking on Things
26. Interoperability: The Challenge Facing the Internet of Things, https://www.prophet.com/thinking/2014/02/interoperability-the-challenge-facing-the-internet-of-things/