IoT in Finance: Benefits and Use Cases

Introduction

Internet of Things (IoT) technology is widely used across the manufacturing, healthcare, agriculture, financial services, hospitality, and retail industries. IoT technology connects everyday objects—watches, phones, industrial equipment, buildings, and more—to the internet, allowing them to connect with each other, conduct transactions, and share information.

IoT makes machines smarter, and your processes more efficient. In this article, we look at how to use IoT in finance. We’ll discuss various IoT use cases in finance as well as some important tips to ensure successful IoT implementation. We’ll also take a look at how you can combine the power of IoT and advanced technologies, such as artificial intelligence and machine learning, in finance.

What is IoT?

The Internet of Things (IoT) is a rapidly expanding network of linked devices that use embedded sensors to collect and exchange data in real-time. In recent times, IoT has provided the fintech industry with a significant boost, particularly in terms of security and payment processing.

Devices embedded with sensors and other IoT technology mechanisms are used as mobile point-of-sale systems (e.g. contactless cards). IoT also helps finance teams collect and share data easily and use it for making better decisions on investments, insurance amounts, customer risks, etc. IoT supports and elevates customer experiences. The data collected by IoT devices also helps detect fraud and cyber threats.

IoT helps finance departments save time and money by gathering and transferring data efficiently. It helps automate core finance processes through efficient collection and processing of information. The application of IoT in finance also extends to improvements in enterprises’ customer experience to a large extent.

Benefits of using IoT in finance

IoT helps collect data from multiple sources to help improve decision-making. It also supports machine-to-machine communication, thereby automating a variety of tasks.

• Faster decision-making

  
  

  Many business decisions including investment decisions are based on in-depth data analytics, business pattern analysis, and market research. Businesses can use IoT devices to collect and analyze clients’ data to gain valuable insights into their needs and ensure faster decision-making. IoT becomes even more powerful when combined with advanced technologies such as AI that have several use cases in finance. to drive strategic decision-making. By leveraging AI, ML, and RPA finance leaders can more effectively analyze big data and make informed, strategic decisions on how best to allocate resources.

  
  

• Streamlines F&A operations

  
  

  Finance and accounting processes involve the collaboration of different departments for the efficient collection of information. Instead of manually collaborating, companies can automate the whole process. The information can be collected and updated to the cloud in real-time using IoT devices. This helps save time and effort that would otherwise have been spent in collating and managing data from multiple teams.

  
  

• Improves efficiency

  
  

  IoT helps track employee and business performance in real-time. IoT devices like wearables track teams’ productive hours and alert you if anything is amiss. They also provide data to check whether your devices such as ATMs and customer kiosks are working efficiently.

  
  

Use cases of IoT in Finance

In this section, we discuss areas in finance processes that can be streamlined or automated with IoT devices and technology.

1. 1. IoT payments

      
      

      IoT payments refer to payments made by a device, without human intervention, based on a set of rules.

      
      

      IoT payments platforms allow customers to pay their invoices through a variety of devices not limited to contactless cards, smartphones, and smartwatches. Enabling IoT payments in your accounts receivable process can help elevate customer experiences and make the payment process smoother.

      
      

   2. Customer service

      
      

      IoT devices help provide prompt assistance for customers. For example, smartphones (IoT devices) can notify account managers or customer relationship managers when a customer walks into your office. This helps you address customers’ concerns quickly and gain their trust and loyalty.

      
      

      IoT devices can also help customers navigate your office premises by providing them the directions to the right executive. (e.g., Citibank allows customers to open doors at ATMs with their mobile phones). IoT technology also supports identity management (e.g. Nymi smart wristband utilizes an individual’s heart rate for biometric authentication) and electronic ticketing for query resolution.

      
      

Overview of IoT-chatbot system Source

1. 1. Credit risk management

      
      

      IoT allows you to gather real-time data of clients’ assets to improve your credit risk management. It also helps send alerts and notifications to your salespersons and finance teams when they deal with high-risk customers. This will help keep bad debt at a minimum and improve ROI.

      
      

1. Fraud detection

   
   

   Banks and financial institutions are prime targets of hackers. IoT devices, coupled with machine learning (ML) applications in finance, help detect anomalies by collecting data from various machines and web applications including payment portals, servers, and teller machines. This helps quickly identify instances of fraud and money laundering and take necessary corrective actions.

   
   

2. Auditing

   
   

   Accounting and auditing are crucial to identify any irregularities in the finance processes and uncover fraud. Traditional accounting and auditing methods involve a ton of paperwork.

   
   

   With IoT in accounting, all transactions can be tracked in real-time and sent to the accounting department. Using IoT, accountants can easily track the audit trails of all the employees or business units, whether they make a purchase or receive money in real-time. This streamlines the accounting process and lowers the efforts that are otherwise needed for the auditing process. This also ensures that the accounting procedure is efficient and error-free.

   
   

Next steps: Implement IoT and automate your financial services

In this section, we’ll look at some tips that can help you implement IoT successfully in various finance functions.

1. Look for proven use cases: Identify areas within finance functions where IoT is used commonly. These are proven use cases of IoT implementation within finance and pose fewer risks. For example, payments is a key area where IoT technologies are widely used.
2. Improve data management: Strengthen your data management structures. Implementation of IoT technologies generates many million gigabytes of data. Therefore, ensuring that you have data structures and governance rules that can handle such volume of data securely is important.
3. Implement adequate security measures: Protect your IoT ecosystem with the necessary cybersecurity measures. IoT devices tend to have weaker defenses and are easy targets for hackers. Ensure that you work with your IT teams and consultants to add other necessary security measures.
4. Track return on investment (ROI): IoT investments are often expensive and hence ensuring that you’ve spent your capital wisely is crucial. You can look at parameters such as how IoT has boosted customer service or reduced the times for audits when you look at ROI numbers.