What does the Internet of Things mean for the Banking Sector?
By Nenad Rankov, Product Manager, Misys
The Middle East is on the cusp of something big, with data showing that the region is well on track to becoming one of the fastest adopters of Internet of Things (IoT) solutions. This network of connected devices that can be accessed online is expected to generate over USD 1.95 billion, opening huge potential for businesses to tap into. Africa is also leading the charge in the field of innovation, with the two markets poised to reach the world’s highest increase of cloud traffic, going from 30 exabytes in 2013 to 260 in 2018.
These figures have leaders in the banking industry wondering what this means for their organisations, and they aren’t alone. Today, we are witnessing a revolution where wearable, smart appliances and health-tracking devices are receiving significant consumer interest and new users each day. Research conducted by Misys shows that, of these digital trends, banks need to improve their wearables strategy in order to meet consumer expectations. According to Misys, 96 per cent of global banking professionals agree that such technology will impact their industry. However, only 15 per cent already have, or were rolling out, an application for wearables at the end of last year. 
Many industries are now looking into ways they can harness this transformational technology, but the banking sector is continuing to fall behind. Traditionally it hasn’t considered IoT technologies as a tool to enhance its offering to customers.
Outside of wearables, the utility and energy sector is a solid example where the IoT can have a major impact. The pressure of utility costs on household budgets is constantly rising. At the same time, conservation and protecting the planet for future generations is becoming one of the imperatives, not just for consumers but for cities and governments as well.
Providers such as Dubai Electricity and Water Authority (DEWA) in the United Arab Emirates (UAE) are deploying smart meters with visual displays showing energy usage. Dubai Government’s vision is to implement one million smart meters across the Emirate by 2020, replacing all mechanical and electromechanical meters. Critically, installing smart solutions in every house will make it possible to gather data about water, electrical energy and gas consumption in real-time.
There lies a great opportunity here for businesses to take advantage of this information. In the emerging ‘age of the customer’, insight will become a key competitive weapon. Banks will have to offer solutions to their customers outside of their existing frameworks in order to obtain valuable data. Obtaining this data will provide banks with a holistic insight into customer behaviour, which in turn will enable them to optimise the services and products they offer.
Banks should take note. They have just the right tool for this – personal finance management (PFM). By leveraging existing PFM technology, big data with engines, analytics and predictive algorithms, banks can help customers manage their resource consumption in the same efficient way they help them manage their money today. Building on customer trust, banks can engage and encourage customers to share their consumption data. In turn, banks can use this data to recommend improvements to energy consumption and can use peer analysis to highlight new ways to save.
The benefits also apply to SMEs which typically struggle to secure loans from financial institutions. As IoT becomes more accessible, the range of products and services that can be enhanced through this technology is exciting. Almost any object can be transformed into a connected one, which opens a vast customer base for enhanced products. By transforming their otherwise traditional offering, smaller businesses can make it easier to acquire funding from banks by leveraging their newly formed “smart” USP. With SMEs receiving more support from banks, the UAE’s economy stands to gain immensely, as businesses under the category make up 40% of Dubai’s GDP.
For the customer, financial and resource related data combined, in one place, may bring the meaning of holistic overview to a whole different level. For the bank, the customer relationship deepens and widens. While the banking sector in the UAE is considered to be very competitive, by embracing the era of digitisation, organisations in the country can better differentiate themselves from other players and offer superior value to their clients.