Like many industries, the financial services sector has a lot to gain from the Internet of Things (IoT). A new report from Deloitte, “The derivative effect: How financial services can make IoT technology pay off,” makes this case, asserting that IoT has the potential to broadly transform the financial services industry just as the Internet did. Deloitte recommends that industry leaders and professionals explore IoT’s promise, examine the impacts IoT can have on the industry and consider how IoT applications may change their jobs in the coming years.
Red Hat sees IoT’s value and has similar advice. In August, Mark Coggin, senior director, product marketing at Red Hat, told Computer Business Review: “All members of the C-suite need to use IoT as a means of moving their firms into the forefront of becoming an agile, software-based, data-driven, cloud-delivered business. Not embracing this means running the risk of irrelevance.” Read the full article.
We’ve written about IoT in the Red Hat Verticals blog before, reporting that there are about 13.5 billion IoT-connected devices, and in five years, it’s estimated that there could be as many 38.5 billion devices. We’ve talked about how more and more Red Hat customers are considering IoT in their own operations (you can read about that in this post). We’ve also written about concerns businesses have about IoT, especially regarding security (here’s a great post on that). Learn more about Red Hat’s IoT perspective and expertise.
But let’s get back to Deloitte’s report, authored by Jim Eckenrode, executive director of the Deloitte Center for Financial Services, and published by Deloitte University Press. According to Eckenrode, some of the conventional definitions of IoT are too narrow, and that “IoT, and its applications’ potential value, goes far beyond mere data communication or analysis.” Deloitte defines IoT in the report as a technology that connects objects (including people) to a network (such as the Internet) in order to provide access to information about that object’s condition, position, or movement.
“FSI leaders can easily imagine the potential benefits accruing from having more comprehensive, real-time data about their own or their clients’ physical assets. Some use cases have already proven themselves: Applications such as auto insurance telematics and “smart” commercial real estate building-management systems offer clear IoT examples of new products or changed processes,” Eckenrode writes. The report delves into many examples like these, and discusses the value they bring, the technologies they use, and more.
Perhaps even more interesting, the report details a longer-term vision of IoT’s value to financial services firms. As part of its research, Deloitte “engaged with a group of academics, analysts, and entrepreneurs with expertise in financial services and technology using a crowdsourced model to imagine how IoT technologies might generate new examples over a longer time horizon,” Eckenrode writes. Fascinating stuff!
For example, IoT applications might be able to help banks improve underwriting processes, better determine credit worthiness, and reach new markets. Physical, performance, and behavioral data generated from biometric and positional sensors culled from shipping and manufacturing control sensors might offer new insights about a business’ operations and provide new opportunities for credit underwriting, especially for those underserved customer segments lacking a credit history. In another example, investment managers might be able to use information from a client’s IoT “ecosystem” to tailor investment decisions and asset allocation based on behaviors, preferences, and location. With a more intimate understanding of a client’s interests and purchasing patterns, investment offerings could be tailored to reflect a client’s desire for socially responsible investing or for investments that have lower risk.
There’s plenty more in the Deloitte report, so check it out. Meanwhile, put on your soothsayer’s hat and tell us how you think the financial services industry could glean real value from IoT in the future.