By the end of the decade, the Internet of Things (IoT) market is predicted to hit the $15 trillion mark, according to Deloitte. In recent years, we have seen the IoT transform the way we drive, our homes, the healthcare industry and its latest industry, financial services. By 2023, the global IoT in banking and financial services is set to be valued at $2.03 million. From banking to biometrics and compliance, investment in IoT across the industry is set to skyrocket; with industry giants making the case for the many benefits its inclusion can have. This year, we can expect to see the banking, lending and regulation subsectors take the forefront and others not far behind.
New research has shown that IoT in the banking and financial services industry is predicted to grow at a staggering CAGR of 55.3 percent between 2019 and 2027. Part of this is largely attributed to the improvement in transparency in financial transactions that its application is allowing. Security is one of the main concerns for both financial institutions and consumers. IoT allows financial institutions to both access and analyzes a vast amount of data in real time, allowing them to make more accurate decisions and risk assessments. For the banking sector, this allows institutions to offer more personalized service (such as rewards programs on credit cards).
This is a niche of the financial services market that is proving to be quite popular since a large portion of the consumer market, including those approaching retirement age, are looking for both financial advice and solutions on preparing for life after their career. However, going through investment options is not for everyone and this is evidenced in the popularity of roboadvisors. By 2020, it is estimated that roboadvisors will have $2.2 trillion of assets under their management, according to A.T Kearney. Behavioral AI now allows investment options to be pre-scanned based on criteria or past choices such as risk preferences or payback period. It is also helping consumers and their families become more educated about their financial options. For parents, the use of child-oriented learning software teaches monetary skills from an early age. For adults, IoT is not just helping them make better financial decisions but understand the reasoning behind it by providing useful information.
The insurance industry can certainly benefit from the use of IoT technology to improve its policies and the accuracy of their premiums. Besides cutting the time taken in the insurance claims process, connected devices make it possible for insurers to more accurately calculate the risk of each applicant. Thanks to GPS trackers and sensors in everything from our smartphones to our cars, behavioral data and pattern can then be used to more accurately predict the possibility of a person engaging in behavior that will result in an unwanted outcome. This means a better-priced insurance premium for you and the firm, and a chance for the customization of the process. Not only does IOT lend itself well at the beginning of an insurance policy, but it also allows insurers to adjust policies as needed.
Companies are realizing the strength of these links between the two and it has propelled the rise in IoT investment in the insurance sector in 2019. GlobalData’s ICT Investment Trends In Insurance report showed that 36 percent of participants within the insurance sector had plans to increase their IoT spending, as companies tussle for the early foray into this new digital dynamic. It is not just applicable to car and health insurance either. The rise of smart and connected homes has introduced the opportunity for seamless integration between a home’s features and its protection policy including any risks.
There’s no denying it: IoT is changing the dynamics in the banking and financial services industry. It is reshaping the way we think about money, the financial decisions we make and the access we have to our financial services. What it has done is allow both the consumer and businesses to not just have access to more information but to be able to link them together; allowing us to seamlessly integrate all parts of our lives and understand how it all affects the big picture.