Internet of Things (IoT) is having a huge impact on business
models and systems around the world. IoT in simple terms can be explained as
devices that have been given the ability to collect data and communicate with each other. It
implies that devices can collect and transmit the data they capture. This
means that insights can be obtained at granular level to create specific inputs
or analyzed for a “larger picture” effect.
Data available in public domain from analysts and industry
research indicate an exponential growth in such interconnected systems and
revenue impact of the same:
- Cisco estimates the IoT market to be $19 Trillion
- McKinsey Global Institute expects the IoT will deliver revenues of $6.2 Trillion by 2025
The financial services is largely impacted by IoT. The
impact across different financial services sectors as per industry findings are shown below:
The highest impact is seen in insurance, followed by
commercial real estate and banking. With more wearables, connected cars and
connected healthcare, insurance sector is the biggest benefactor. However the
impact is all across. The recent tie-up between Samsung and MasterCard is a
good example of how it can help in banking and retail. As an example, based on
the data shared by your Samsung refrigerator or Samsung washing machine, it may
be time to replace / repair. These data can then allow MasterCard to send you
personalized offerings on extending credit for a purchase based on your
portfolio and lifestyle.
In insurance it is more obvious, from your lifestyle to
driving habits, your insurance offer can be suited to your behavior and habits.
Some of the key impacts that financial services industry would
need to consider would be around some of these key issues:
1.
- Identity Management – With spread of devices across home and offices it would to identify the users. Same device may be used by multiple users, like a car or treadmill. Identifying the right user will be challenge and traditional forms of identification may not work.
- Privacy – In line with identity management will be the challenge to manage data privacy. The data is collected across a whole range of device will create own sets of risk. This will call for new policies and processes around data privacy and there may be still many unknowns in this area.
- Security – Tied to the above two aspects are security policies and mechanism. Data shared over multiple devices and medium are prone to be hacked or manipulated. This can impact the end user services. There needs to be standards developed and agreed for these. Also the question will be who is liable for or pays for which part of the data security domain. Is the Bank or insurance company liable for data leakages inside my home or from my car?
Other than the above critical impacts, issues of
inter-operability standards, reliability and collaboration between devices and
their impacts on services will be an important consideration. The technical
standards may be easy to resolve or address, the challenge will be to determine
the contextual relevance of the data. Which in turn means how much of
intelligence resides on the device and how much on a central system?
Though the proliferation of IoT devices is without doubt in
the financial sector, it would seem that the impact has not yet been assessed.
The systems and models are likely to evolve along with the requirement, but the
speed of change will be very quick. Those who start early will benefit.
