Mike Laven is CEO of Currency Cloud, a provider of cross-border money transferring services, explains how the Internet of Things could revolutionise personal finance.
I often use a FitBit to track how many steps I take every day. When I connect my device to an app on my mobile phone, I can see how many calories I am burning, how the number of steps I take varies over time, and also how close I am to hitting my fitness goals. It’s a technology that has slotted into my daily routine, offering real-time insight into a topic that matters to me.
But imagine a world where my FitBit automatically connects to my fridge – and, knowing I have eaten poorly that week, arranges for an extra portion of fruit and veg to be added to my next weekly shop? Or, if I go out for dinner, my phone sends me an alert to suggest healthier options that are on the menu in that particular restaurant. Imagine too, if every time I needed petrol, my car had already worked out the best petrol station to go to, based on my driving style and usual routes?
These might seem like impossible ideas rooted in science fiction, but in fact, they’re already happening. And, the reason for this – the thing that links them all – is the Internet of Things (IoT). Sensors are playing an increasingly prominent role in our lives, allowing the devices that we use every day to be networked together.
The future is now
Any ‘thing’ with a digital heartbeat – from homes to appliances, cars to transports networks – can be connected in this way, enabling a multitude of interactions. And, these interactions result in data – in fact, an explosion of data – that can be used to power a truly intelligent and adaptable technological ecosystem. If we think of the applications of that data, the potential for IoT to revolutionise processes, business – even whole industries – is limitless. This is certainly true for the financial services sector, where IoT could have a huge impact on payment authentication and customer service.
If we think about current authentication methods, they often involve ‘active’ participation on behalf of the consumer. We have to enter our PIN number when we pay by credit or debit card, or validate ourselves by finger print with services such as Apple Pay. By contrast, IoT could enable truly frictionless and completely secure payments to be made with no involvement from the consumer. In this way, the point of payment could become something that is invisible to the consumer, and simply happens automatically in the background.
Data from connected devices could be used to build an accurate profile of a cardholder over time (how often do they shop with this vendor, how much do they spend, in which locations do they most commonly make payments), allowing banks to spot with greater ease when ‘abnormal’ payments are being made. We could therefore see step-up authentication, or active authentication by the cardholder being required only when there is a breach of these normal limits. As such, our bill could be paid immediately as we exit our favourite restaurants or stores, putting an end to the annoying wait to pay after a meal, or queues at tills.
Banks are also putting the customer experience centre stage in their efforts to embrace data, and are recognising the ways in which IoT could be used to enhance the consumer/bank relationship. Concerned that there is little differentiation between their offerings, they are using data analytics to offer personalised reward programmes, targeted to each individual customer.
In reality, this means that if I were to visit my local shopping centre, my bank could use geolocation data to send relevant deals straight to my phone or smart watch. They’d be able to tailor these deals to my spending habits and preferences, based on my shopping history. Likewise, if I’m in the market for a higher-value purchase such as a car or TV, my bank could let me know how much financing I’ve been approved for, or the best loan proposals available at that very moment. Wouldn’t that make me like my bank that little bit more?
Much like the fridge that can predict when I need to eat more greens, my bank could also spot when I need to reign in my spending – before it even happens. By using data analytics, the bank can predict what my account balance is likely to be at the end of the month and advise on ways to manage my finances better in real-time.
The beauty of IoT is that, being grounded in data, it can learn and adapt to each customer’s individual behaviours over time, so that the services banks offer are always relevant, accurate and personal. In terms of a customer service tool, this is potentially revolutionary.
When it comes to IoT, the future is now. As consumers demand ever-more personal, convenient and immediate relationships with their banks, businesses operating in the financial service sector must put IoT firmly at the centre of their digital transformation strategies. Who knows – the next time you’ve hit your saving and fitness targets, your bank might just fill up your fridge with champagne and chocolates to say ‘well done’!