IoT helps financial services re-engage their customers

The Internet of Things (IoT) has truly begun to take off with enabled devices including smart watches, smart meters and connected cars as well as smartphones and tablets. However, technology and appliances are not the only industries affected by this growing trend. In fact, IoT’s potential reaches far beyond, and could play a major role in helping disconnected industries re-engage with their customers.

An obvious industry that has been struggling is finance, with established institutions fighting to regain, let alone retain, the brand equity they held prior to the 2007-2008 financial crisis.

Today, consumers of all ages expect smart digital experiences from all companies, including banks. Despite this, they continue to receive less value from their banks than they expect. From here, a “value gap” has developed where customers are not receiving financial advice as and how they need it.

To highlight this, a recent global survey by Cisco has found that 43 per cent of customers don’t feel that their primary bank understands their individual needs. This lack of trust and value felt by customers has led to a breaking point, where nearly one in four bank customers intend to choose a different provider for their next financial product or service. This even includes non-banks such as Google and Apple, as well as retailers like Marks and Spencer’s.

Due to banks struggling to get to know their customers as individuals, they cannot address their customers’ financial needs and aspirations. As a result, competitors are taking notice of this and capitalising on the four out of five customers who now trust a non-bank to handle their banking needs.

This has been achieved by engaging customers with convenient transactions and proactive services traditional banks are lacking. Banks need to respond to this to retain market share and capture customers or risk losing those seeking better advice and more relevant mobile experiences.

Banks need to start understanding their customers on a personal level. To achieve this, they will need more information than a name, address and credit score.
So how can banks find this extra information? By harnessing the mass quantities of data capable of being produced by IoT enabled devices.

For example, IoT enabled wearables. Designed to make our lives easier, they increase the capacity to manage our professional and personal lives on the move, so unsurprisingly, 63 per cent of bank customers worldwide are interested in using a smart watch for mobile banking and payment services.

What’s more, they are prepared to use these to share their most personal information in exchange for products tailored to their lifestyle choices. 51 per cent of respondents stated they would be interested in a life or health insurance product that tied its rates to healthy habits tracked on a wearable device such as a Fitbit.
Luckily, for the 61 per cent who also expressed interest in car insurance, companies like Aviva are already using apps with GPS data to assess driving habits and offer safe drivers lower premiums. These examples of mobile devices being used to collect highly personal information demonstrates the distinct benefit to customers – the right price for the right policy.

Naturally, this influx of data will also need to be stored, managed and analysed. The knock-on effect will inevitably be the need for more resources provided by data centres, resulting in the need for a larger workforce to manage this.

As companies and banks begin to understand that data analytics is not just for reaching out to grow their business, but reaching in to become more relevant, the demand for personal data will only escalate. As a result, more industries will inevitably utilise IoT to gather invaluable data, which consequently will increase the demand for more space to store the data. In turn, this means even greater importance will be placed on data centres, which will be in increasing demand as the exponential rate of data produced from personal devices, as well as corporate computers, requires expert management.

The finance sector may not be the most obvious industry to actively embrace IoT, but banks will need to quickly create frictionless interactions with their customers and move on from the current archaic, paper-based approach to a become fully digitised business process. By creating new services enabled by data provided from IoT banks can close the “value gap” and regain trust.