The Internet of Things is growing tremendously fast: back in 2010, people owned 12.5 billion networked devices. By 2025 this number is predicted to grow to 50 billion, according to Cisco IBSG.
We see it used everywhere: the Internet of Things in business, farming, manufacturing, healthcare, smart homes, and, of course, our smart wallets. Banking is becoming more convenient because of the IoT, and the future of the banking industry looks very digital-like.
What the Internet of Payments stands for, how to use it, and what are the main benefits of IoT in Fintech—find out in this article.
What’s the Internet of Payments?
Basically, the Internet of Payments (IoP) means the payments are done from IoT-powered objects—wearables, appliances, or vehicles that can be connected to the Internet, as well as managed remotely.
Wearable devices include wristbands, watches, rings, and other accessories we wear. In fact, it includes anything that can have an in-built NFC payment chip.
Digital payment technology embedded in wearables lets users make a payment just by waving or tapping the device on a POS terminal. Sometimes without an active internet connection.
You use IoP every time you pay for a coffee with Apple Watch, place an order with Amazon Echo, or use a smart fridge that re-orders groceries for you.
Of course, payment-enabled accessories are not limited to smartwatches or bands. In the 2018 Winter Olympics, Visa introduced new payment-enabled wearables—pins, gloves, and prepaid stickers that could transform anything into a payment device.
Why do banks need this?
There’s a good reason for that. J Paul Leavell, senior marketing analyst at Charlotte Metro Federal describes it as: “If you’re paying for groceries with your refrigerator, as a banker, I want to have my credentials in your refrigerator making that payment.”
Which summarizes why banks are so interested in the Internet of Payments.
Another example: Mastercard’s President for UK & Ireland, Mark Barnett, says that cash will become obsolete in the UK within the next five years as these technologies become even more efficient and more accessible.
The Institute of Electrical and Electronics Engineers (IEEE) agrees: they predict mobile payments could make cash and credit cards redundant by 2030. This is all because of the convenience and provided by Apple Pay, Samsung Pay, and Android Pay that continues to appeal to mobile users.
That’s why financial companies have started to create software for wearables devices. Some even make their own gadgets and payment apps. According to the Prime Indexes forecast, 60% of financial companies are expected to use wearables as a payment tool.
IoT Benefits for Financial Services
Here are the top reasons why ‘FinTech+IoT’ is a winning combination:
- Allows banks to offer personalized services. Banks and other financial institutions use IoT to collect data about their clients—and find the best way to connect with them. By collecting more information about users’ needs, commercial companies create more personalized content and even personalized products.
- Makes financial management fast, easy, and secure. FinTech+IoT gets into people’s everyday business and becomes an essential part of it. Customers connect their wearables with banking apps to track the expenses, set daily limits, or even block accounts if the amount they’ve spent exceeds these limits. Such apps replace physical cards, making transactions more secure, fast, and shopping—more convenient.
- Help with credit risk assessment. Data is a huge part of IoT and one of the major benefits in the banking sphere. Data analysts use various sensors and M2M communication protocols to get access to figures from other fields, addressing multiple needs from verifying the identity of a bank’s clients to fraud prevention.
Machine to machine communication has tons of potential. First, IoT empowers automated cashless payments—fast, secure, and trendy.
Next, it helps to analyze how users spend money. In turn, banks may help people with financial recommendations, promote shared investing, or p2p lending.
From In-App Payments to IoT-Connected Key Fobs: 5 IoT Use Cases in Financial Services
IoT gives the fintech industry a huge boost, especially when it comes to security and convenience. Now, how big companies and startups take advantage of IoT?
Here are four examples of how the Internet of Things helps companies revolutionize the financial industry right now.
The company has formed a few partnerships to make products that streamline our everyday activities:
- with Coin (contactless payments)
- with Samsung (these smart refrigerators that can re-order groceries)
- with General Motors (making IoT-connected key fobs)
Dynamics is using IoT to make IoT-connected payment cards–interactive and battery-powered—that provide two-way communication between banks and their clients.
Each Dynamics card comes with a display screen clients can use to ask questions and get answers fast. And Dynamics Wallet sends a notification with details about when where and how payments were made to the client’s bank.
Stripe used IoT for creating Stripe Terminal for retail outlets. It helps retailers manage online and offline sales, simplifying reporting, and allowing users to create customized email recepts or splash screens.
Stripe’s card readers provide end-to-end encryption, support contactless payments (Apple Pay and Google Pay), and help protect users against frauds.
Metromile creates smart IoT-connected trackers to make personalized per-mile insurant plans based on driving behavior and mileage. A driver pays a low monthly rate for their insurance, plus a few cents per mile they drive.
Besides, the driver can easily file a claim in their app or do it online if any accident happens. Or expedite their claim using an AI-assisted system.
That’s just the tip of the iceberg. IoT has great potential in the FinTech industry and a bright, promising future.
And as this technology continues to grow, financial companies must move with the times and implement digital innovation in their everyday operations and strategies. All centered around the end customer who is (almost) always connected to the Internet.
Maria Diachenko is a tech writer at Cleveroad. It’s a mobile and web development company in Ukraine. Maria enjoys making how-to tech guides, describing programming trends and IoT innovations.
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