Banks may be able to leverage IoT to identify new services and revenue streams as traditional business models come under threat.
However, the financial services industry (FSI) hasn’t recognising the significance of IoT, which is reflected in the amount it is investing in the emerging technology, according to Gartner.
Speaking at the Gartner Symposium on the Gold Coast last week, Gartner practice vice president for financial services Pete Redshaw said IoT is “very much underfunded”, arguing banks are yet to recognise how IoT could shape their business.
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Redshaw was presenting research into the FSI industry, which found despite digital transformation efforts, the majority of incumbent financial services firms will become irrelevant or extinct.
Gartner predicts by 2030, 80 per cent of heritage financial services firms will go out of business, become commoditised or exist only formally but not competing effectively, effectively as “zombies”.
Driving the disruption is loss of market share to global digital platforms, fintech companies and other non-traditional players, which are using technology to change the economics and business models of the industry.
“There’s not going to be any return to the good old days. We can’t just wait it out until it has all died down,” Redshaw said.
In Australia, the financial services sector including banking, securities and insurance providers is forecast to spend almost A$21.7 billion on technology products and services in 2019 in its digitalisation push, an increase of 4.9 per cent from 2018.
However, Gartner surveys have found that digital business in the banking sector is predominantly a channel and transaction automation play, focused on business optimisation as opposed to transformation.
Redshaw urged the audience of IT professionals to find new strategies to create value, “because we are not going to earn enough from the old things, they will remain but we need to supplement them with something else”.
Spotting new opportunities
Much of the adoption of IoT in FSI is coming from the insurance industry, for example telematics in connected cars and apps which monitor driving style, Redshaw said.
He said the banks often struggle to think of use cases for IoT, and ones like monitoring ATMs or introducing queue busting technologies in branches aren’t going to have a major impact on the business model. Instead, Redshaw argued, banks need to think beyond their own four walls, and look to the adoption of IoT in other industries, like auto or manufacturing.
“Every time something goes wrong in those other industries we should know about it,” Redshaw said.
“We should know when your car has crashed or failed, when your supply chain has broken down, when your home has flooded, when you have a problem with your health though your Fitbit or smart watch. We should know because for banks there is always an opportunity to facilitate a payment or to extend a line of credit to tide you over for that emergency.”
Redshaw said banks “should be proactively reaching out and spotting these other opportunities that arise in other industries”.
“We don’t wait anymore. In the past we would literally wait for the knock to come on the door, these days we wait for the virtual knock to come on the portal, but those days are going to go.”
Of course, pre-emptive messaging is not without its concern, namely creepiness.
“People will expect us to recognise their situation and reach out appropriately. We don’t want to bother people and we don’t want to spook people, but there is an opportunity there,” Redshaw said.