Imagine a wrist band that gives you a real electric shock if you overspend. Sounds scary? Sounds too intense? Sounds like something you wouldn’t try?
This wrist band is the latest technology developed by digital financial solution company Intelligent Environment, who claims to be the first company in the financial sector to apply IoT in banking.
Here is how this “shocking” IoT banking platform works.
1) Consumers log into their credit card or bank account.
2) They connect their device (which is a wrist band developed by Pavlok) and set a spending limit.
3) When users are on the verge of reaching the limit, their phone will display a notification informing them that they are about to overspend.
4) If users go over their limit, Pavlok will deliver an electric shock to their wrist (of course one can set the intensity of the shock from a scale of 0-10).
Now, imagine you are a die-hard shopaholic, would you not be interested in trying out this wrist band, which might help you break your old habit and get your personal finances back on track?
Pavlok might be an extreme example of how IoT could fundamentally shape the way people manage their finance, but it serves the purpose of highlighting the importance of IoT as a disruptive force.
Payments is no doubt the first child of IoT and Banking. One prominent example in the market is: Groceries by MasterCard – an IoT application available with Samsung Family Hub Refrigerators. The story is not new:
You stand in front of your smart refrigerator, which has sensors that can easily detect whether you need another gallon of milk for your family. Groceries by MasterCard integrates with FreshDirect or ShopRite e-commerce platform and orders the groceries for you automatically and effortlessly. There is no longer the need to open the fridge to check each item manually and then run to the grocery store to purchase them. How would you pay? The actual payment is, of course, made from MasterCard, which goes through NFC technology served by Coin, an official MasterCard partner who brings payment to a wide variety of fitness bands, watches, and smart wearable devices.
Samsung is not the only digital giant who is eyeing IoT payment. Amazon Dash Button and VISA have also been building payment capabilities into everyday items.
Application of IoT in banking will no doubt produce data – massive amounts of data – and it is up to us to find a smarter way to analyze these real-time contextual customer engagement dots, irrespective if they are structured or unstructured.
Below are my own takeaways from existing research:
- Banks cease to be the sole partner in people’s financial life. There are manufacturers who need to be engaged and prepared – no matter if it is furniture, phones, wearables or geo-locators. All devices need to be smart in collecting data and taking smart actions. Why? If the device is not well-maintained or has the wrong attributes, the level of data collected will not help banks achieve the level of personalization that will delight its customers.
- Secondly, data analytics must be integrated at scale so that the customer journey is not just wishful thinking. By analyzing data collected from numerous devices and sensors, banks need to figure out who the customers really are, what products they prefer, and their lifetime value. For example, if the fridge has smartly figured out that the customer needs to purchase milk, banks also need to know which card and loyalty program customers prefer to use. In other words, banks should not rely on data collected from a few traditional channels, but aggregate all inputs to portray a complete customer persona that is unique to that customer.
- Security is a diehard concern for banks. One of the risks in IoT banking that has been brought up is the level of authentication and authorization needed when engaging a customer. However, I tend to agree with another school of thought, which believes that IoT will serve as a game-changer for banks to KYC customers. How? With devices that easily identify someone’s biometrics, customer’s onboarding becomes completely digital, secure, and frictionless.
In conclusion, with the right device in the right context, banks cease to be a distant figure that exists only in branch or on a smart phone, but in people’s everyday life. IoT banking will allow banks to obtain a new level of understanding of the needs of both consumer and business clients, reaching a new level of customer intimacy.
Author: Shuyao Kong