06 October 2017
How IoT changes financial services and banks
Internet of Things is going to change the business models of banks and financial services offering, generating great opportunities, but also new challenges.
According to BI Intelligence, in fact, currently there are 7 billion of IoT devices, but this number will rapidly rise to 22.5 billion by 2021. There is no doubt that the technologies related to the Internet of Things will be everywhere: in any company, in any device, in any network and even on any individual.
This scenario will create the so-called “banks of things” that take advantage of the customer data collected from any device to offer them different services. Banks will be able (and somehow they already are) to gather data from any device, including personal data collected by smartphones and also by wearable technologies or even connected cars. This data can be used, for example, to provide to the customers innovative services, more tailored to their specific needs.
Banks will transform into platforms
This topic will become even more relevant with the entry into force of the European Payment Services Directive (the so-called PSD2) which will transform the banks into “platforms” to which third parties can connect to through the APIs to provide their services.
Widening the number of service providers will inevitably increase the volume of data that can be collected, but the ability to exploit this data will also depend on contractual agreements with third parties. It can, in fact, generate possible management savings, since data analysis may allow banks to adapt their business to their needs and the actual use of some resources. It’s also possible to create a “marketplace” of data that even third parties can exploit for their business. This is the industry with the greatest potential and less explored – at the moment. If sensors are embedded in any device, banks could get a huge amount of data that can represent a valuable resource for third parties who are interested in managing any type of activity.
New legal issues
As it usually happens for almost all changes in business models, new legal issues will come, as privacy becomes even more significant matter. Banks have always been working out large amounts of data when dealing with relevant privacy issues. Internet of Things technologies increase the size of the problem because the data will no longer be collected only by bank accounts, home banking systems and subsidiaries, but also by any device or car, and will be used not only to ensure the proper execution of financial transactions, but also to provide services, get savings and share data with third parties.
On a practical and innovative level, big market players are adopting a series of initiatives aimed at developing models that combine IoT and the world of digital payments. It is the case of Samsung who has decided to overcome the limits of smartphones in NFC payments and that, together with Ingenico and Smartlink, is developing Contactless Companion Platform (CCP): a platform for contactless payments capable of transforming any object (such as watches, bracelets and rings, but also the remote control of the car or the “tokens” for home banking), into a “payment tool” or a “wallet”. Another interesting example is the Amazon Web Services IoT Button: a programmable Wi-Fi device aimed at developers who can use it to test and then release innovative projects based on the AWS Internet of Things tecnology. The use cases for the AWS IoT Button are multiple: from home automation to order entry, to notifications.
Last but not least, during the last edition of IFA (the consumer electronics trade show in Berlin), Garmin and Fitbit, two of the main actors in the wearable technology industry, both presented almost at the same time their model of smartwatch equipped with a contactless payment system based on the Visa and MasterCard circuits. All these devices are equipped and will be more and more equipped with contactless payment systems in the near future. Which will give a powerful boost to the overall development of digital payments.
With regard to the Italian experiences, Intesa Sanpaolo has bet on the development of the Internet of things with the opening of an Innovation Center (in London) that gathers innovative companies active in the Internet of Things & Digital and a series of investors that include investment funds, business angels, venture capitals, incubators and customer companies.
Cisco, a leading IT company, chose Italy for the first European edition of its SkillZone, a bootcamp of 7 months for unemployed organized with partner companies to train professionals with an end-to-end basic knowledge on IoT and a specialization on in-depth analysis of data or on the security of IoT systems.
Other positive signs on the Italian development of IoT in digital payments come from the annual Digital Payments Study conducted by Visa. According to the study, 74% of Italians use their mobile device -smartphone, tablet, wearable- to manage finances and payments, a given percentage that is the highest among Western European countries. Going into details, the study reveals that 56% of Italians control their statement of account or access other services via banking app and that 36% of our countrymen make regular use daily, up 9% compared to 2016. Italians are very inclined in comparison with the European average (68%) to use payment services on mobile devices, with 8 Italians out of 10 (81%) who have used a payment service with the storage of the credit card data or a service of payment based on the Web or the mobile device (mobile wallet). Web-based payment services are most widely used in Italy with a share of 63%. And if 55% of Italians use a mobile device for their own shopping, only 36% send money to friends and relatives using a smartphone or tablet.