The prospect of Internet of Things (IoT) technologies in banking may have received a lot of hype, but it remains a distant dream for many banks who are still just trying to keep the lights on.
LONDON, UK — At our Internet of Banking conference last week, this speculation was in full affect. During discussions and keynote talks, we heard about everything from making payments on smartwatches to sensors tracking when cows are in heat, and yet we still couldn’t find definitive evidence to suggest that the banking industry will embrace the IoT anytime soon.
The final panel of the event confirmed this when, during a discussion on how artificial intelligence (AI), machine learning and IoT will affect banking processes and business models, conversation immediately turned to how the supply chain is benefitting from track and trace technology on freighter ships (it is true, though).
Banking on IoT…or not
So what will IoT do, if anything, for a banking industry facing increased competition, tight regulance and new competition? Will Beeson, head of operations and innovation at Civilised Bank, explained that the impact is going to be limited, for now at least.
“I think it’s probably worth saying that the power of AI and machine learning sits well outside of banking… I think it’s [use is] very much in helping surgeons perform their work, for example. Banking is a kind of marginal use case for a lot of these technologies.”
This wasn’t exactly the positive start we, let alone cash-hungry IoT vendors, were after, but BluSpecs Innovation CEO Tanya Suarez noted that banks could look at “developing new products aimed at specific client groups.
“Say we use predictive maintenance on tractors, we might want to offer a farmer a loan to buy a new tractor if we can see his has broken down three or four times,” she said.
Beeson proposed the idea that personal card details could be stored on a machine so that the transaction happens without you doing anything – a neat if futuristic vision which still seems some way removed from today’s reality.
Indeed, Jennifer Palmer, head of core product proposition at Starling Bank, brought everyone back down from those dizzy heights of tomorrow by pointing out that we’re only just getting to grips with robo-advice: suggestions on how to manage your finances from a machine that learns about your data.
“People don’t want to talk about money,” Palmer said. “So how do we make people more confident and comfortable? Some of that is not thinking, maybe that’s where machine learning comes into play. It’s keeping people abreast of their account updates, but they don’t have to worry about it.”
That was not the only possible challenge, with a number of other speakers telling IoB of the legacy challenge. After all, many banks today are still reliant on dated, proprietary systems, including mainframes that have been around for decades.
Don’t rock the boat
Perhaps IoT might change banking after all, if banks can adapt their services to meet the needs of the IoT.
“In a way, banks are already at the center of the IoT: they are connected to mobile phones, payment terminals and ATMs,” Bas Geerdink, IT manager at ING told IoB in emailed comments. “The IoT will offer plenty of more devices that can have a direct or indirect connection to a bank: cars, household equipment, manufacturing machines.”
If that’s so, why aren’t banks adopting IoT themselves?
“Generally banks are not yet adopting the IoT… [because] customers’ demands, rules and regulations are simply not ready yet to connect a highly secure bank to a great number of devices,” Geerdink admitted. “While there is a lot of talk and strategy, most banks are not yet connected to cars etc.”
Our panel was in agreement with this sentiment. Challenges around data privacy and authentication puts both banks and customers off, couple that with the fact that banks are traditionally risk averse and it’s a tall order to make IoT happen quickly. No one wants to be the next Tesco, and IoT might open you up to that.