This was underlined by the Financial Conduct Authority earlier this year when it identified technology as a top-four priority area in its 2015/2016 Business Plan. However, it’s highly likely that the body’s plans to investigate how widely innovations in technology are being adopted by banks will reveal disappointing under-utilisation.

Far from being digital leaders, banks have tended to lag behind other industries. This is not without good reason – banks and financial services institutions have grown organically as they’ve expanded into new international markets, a process which has not lent itself to easy and simple integration of back end systems.

They are also justifiably cautious when it comes to change, erring on the side of continuity. But this status quo cannot last. Not only are new burdens imposed by regulators forcing banks to be more responsive and agile when it comes to data and systems, but major new forces such as the Internet of Things (IoT) and Big Data are changing the way customers think and the industry operates.

Despite the industry’s awareness of these concepts, however, they remain frequently misunderstood terms. If banks are to realise the benefits that the technology offers and propel the industry to the next level, they must first understand what these concepts mean and how the technology can augment their business capabilities to achieve maximum results.

Understanding the IoT

By 2020, there will be a staggering 75 billion connections within the vast network of smartphones, appliances, manufacturing equipment and wearables which is now widely referred to as the Internet of Things.

This increasing hyper-connectivity is producing colossal amounts of data on people, devices and processes. Significantly, the IoT goes a step beyond harnessing Big Data and extracting insights through analytics by making the information readily available and consumable by other systems and networks in real-time.

In this way it acts as an intermediary platform that helps to turn information into a force that can boost efficiency, increase productivity and drive fundamental improvements in customer experiences.

The IoT is, then, perhaps best understood less as an object and more as a concept, one that captures the connectivity of the digital economy, for consumers, for organisations, through supply chains and across geographies

Above all, it is important to recognise that it this an existing reality that we all need to work within, rather than something we can attain or acquire, or a state of play looming on the horizon; the IoT is having a profound impact on all industries and the time to respond is now.

Real-Time Rewards

Advancements using IoT platforms have already been made in improving customer experience. This is most welcome; at last month’s forum, fintech firms pointed out that banks could do more to offer customers what they want. With technology a key enabler of new services, those who fail to innovate face losing relevance.

The use of IoT-enabled technology to provide a more convenient and rewarding experience for their credit and debit card customers is one of the most-cited examples; this may include, for instance, banks analysing the frequency of ATM usage within a certain area and targeting specific zones for ATM installation where foot traffic is highest.

Banks are also fighting the perception that there is little differentiation between offerings, according to The Millennial Disruption Index research, by using analytics to offer customised, rather than blanket, reward programmes to customers.

In partnership with companies like Edo, analytics is enabling banks to provide location-based discounts in real time. This kind of IoT technology uses geographical data to identify offers and deals from nearby merchants that become active as soon as the customer swipes their debit or credit card at said merchant.

Through using data- and location-driven insights, banks can anticipate customer needs and offer advice, products and solutions to help customers make smart and financially sound decisions. With benefits like these, the use of analytics-based reward programmes is becoming a key differentiator for banks.

Looking to the Future

It is clear that the IoT is opening the door to the future of banking and financial services. Yet, while banks must increasingly turn to the IoT to improve the customer experience and gain market share, improvements in overall network infrastructure, Big Data analytics and cloud accessibility must first be completed before the IoT can be implemented on a truly massive scale.

When it comes to big data and the benefits identified, the challenge is to reduce both the IT stack and the access time dramatically in order to provide more up to date data which can be used to take action on a real time or more immediate basis. This means acting on the data as it looks now, rather than how it looked last week or last month.

One of the major challenges holding the banking sector back in this area is that posed by legacy IT infrastructure. The lack of customer pressure in the past had given banks little reason to change their set ups but, now, widespread significant remodelling is required to simplify cumbersome systems and ensure that new technologies can be deployed effectively.

Driving change in this area is also particularly pressing for banks given the current sector environment, in which an increasing number of challenger banks who can and are taking advantage of advances in technology are gaining regulatory approval.

Indeed, change is a must if the industry is to keep up with the intelligent devices and intelligent communication technologies that are paving the way for the future of business. Banks that get ahead of the curve in their technology adoption today to improve customer experience, engage their audience and boost productivity will be tomorrow’s market leaders.