Emerging Technologies SIG series – What are the benefits of IoT for financial institutions?

To provide additional information related to the Emerging Technologies SIG of the FINOS/Linux Foundation, I start a miniseries of posts going deeper into some of the technologies mentioned there. If you are interested in participating, please add your remarks at the Special Interest Group – Emerging Technologies item on the FINOS project board.

The Internet of Things (IoT) is a term used to describe the interconnected network of devices, sensors, and machines that can communicate with each other through the internet. It has the potential to revolutionize many industries, including the financial sector.

In the financial industry, IoT technology can be used to improve operational efficiency, enhance customer experiences, and provide new revenue streams. Here are some examples of how IoT can be used at financial institutions:

  • Smart ATMs: ATMs can be equipped with IoT sensors to monitor their health, detect malfunctions, and trigger maintenance alerts. Smart ATMs can also use location-based data to offer personalized services and promotions to customers.
  • Payment wearables: IoT-enabled wearables such as smartwatches and fitness trackers can be used for contactless payments. Payment data can be securely transmitted to the financial institution using blockchain technology.
  • Fraud detection: IoT sensors can be installed in bank branches and ATMs to detect fraudulent activities in real-time. Sensors can also be used to monitor customer behavior and detect unusual transactions.
  • Asset tracking: Financial institutions can use IoT sensors to track the location and condition of assets such as vehicles, equipment, and inventory. This can help optimize asset usage and reduce the risk of theft or loss.
  • Insurance telematics: IoT sensors can be used to collect data on driving behavior, such as speed, acceleration, and braking. This data can be used by insurance companies to offer personalized policies and rewards for safe driving.
  • Predictive maintenance: IoT sensors can be used to monitor the health of financial equipment such as servers and ATMs. Predictive maintenance can help identify potential issues before they become major problems, reducing downtime and repair costs.
  • Personalized banking: IoT data can be used to offer personalized banking experiences based on individual customer needs and preferences. For example, banks can use data from wearable devices to offer personalized financial advice and investment recommendations.

IoT technology can also be used to improve security and compliance in the financial industry. For example, IoT sensors can be used to monitor physical security, such as access control and surveillance. IoT technology can also be used to monitor compliance with regulations such as anti-money laundering (AML) and know-your-customer (KYC) rules.

Getting off from the pink clouds, while IoT technology has many benefits, there are also some limitations that need to be considered. Here are some of the current limitations of IoT and how they can be mitigated:

  • Security: IoT devices can be vulnerable to cyber-attacks, which can compromise sensitive data and cause significant damage. To mitigate this risk, it is essential to implement strong security measures such as encryption, authentication, and access controls. Regular software updates and patching can also help keep IoT devices secure.
  • Interoperability: IoT devices from different vendors may use different communication protocols, which can make it challenging to integrate them into a cohesive system. To mitigate this challenge, standards such as the Open Connectivity Foundation (OCF) and the Industrial Internet Consortium (IIC) have been established to promote interoperability between different IoT devices.
  • Data privacy: IoT devices collect a significant amount of data, which can raise privacy concerns. To mitigate this risk, it is essential to implement robust data privacy policies and practices, such as data encryption, anonymization, and secure storage.
  • Complexity: IoT systems can be complex to deploy and manage, which can make it challenging for organizations to derive value from them. To mitigate this challenge, it is essential to work with experienced vendors and consultants who can help design, deploy, and manage IoT systems.
  • Scalability: IoT systems can generate vast amounts of data, which can strain network bandwidth and storage capacity. To mitigate this challenge, it is essential to implement scalable architectures that can handle large volumes of data. Cloud-based solutions such as AWS IoT and Azure IoT can help organizations scale their IoT systems as needed.

So, while IoT technology has many benefits, it also presents some challenges that need to be addressed. By implementing robust security measures, promoting interoperability, protecting data privacy, simplifying system complexity, and implementing scalable architectures, organizations can mitigate these challenges and realize the full potential of IoT technology. One of the most pressing item is interoperability from above, as many of the other items (like security, scalability, privacy) can be driven from it. 

We are lucky: There are several open standards for IoT that are designed to promote interoperability between different devices and systems. Open standards are important because they allow devices and systems from different vendors to communicate with each other seamlessly, which can help avoid vendor lock-in and promote innovation. Here are some of the open standards for IoT:

  • MQTT (Message Queuing Telemetry Transport): MQTT is a lightweight messaging protocol that is designed for use in IoT applications. It is used for sending messages between devices, and it is designed to be efficient and reliable.
  • CoAP (Constrained Application Protocol): CoAP is a protocol that is used for low-power and low-bandwidth IoT devices. It is designed to be lightweight and easy to implement, making it ideal for use in resource-constrained devices.
  • OCF (Open Connectivity Foundation): OCF is a consortium of companies that are working to create open standards for IoT interoperability. OCF’s goal is to create a common IoT framework that can be used by all IoT devices and systems.
  • ZigBee: ZigBee is a wireless standard that is designed for low-power, low-bandwidth IoT devices. It is used for creating mesh networks, and it is designed to be secure and reliable.
  • LoRaWAN (Long Range Wide Area Network): LoRaWAN is a wireless protocol that is designed for long-range IoT devices. It is used for creating wide-area networks, and it is designed to be low-power and low-cost.

By using open standards like these, IoT devices and systems can communicate with each other seamlessly, regardless of the vendor or technology used. This can help promote innovation and avoid vendor lock-in, which can ultimately benefit both organizations and consumers.

In conclusion, IoT technology has the potential to transform the financial industry by improving operational efficiency, enhancing customer experiences, and providing new revenue streams. Financial institutions that embrace IoT technology will be better equipped to meet the needs of their customers and stay ahead of the competition and even can help creating additional value and sustainable businesses – do check out the journey of HB Antwerp and Botswana.