How banks can tackle holiday spending and consumer services through the IoT

By Jonathan Crowl

The holiday season is a time of joy, but it’s also a time of stress — especially for people’s wallets. Holiday spending can be a constant headache for many consumers, either because they don’t have enough money to buy what they want or because their spending gets out of control and leads to high credit card balances that can take months to pay off.

Banks can provide positive support by offering a range of tools to help customers budget and manage their spending. These tools are increasingly made available through mobile apps on consumer smartphones. However, banks and other financial services companies are already looking ahead to how they can leverage the IoT to build more intuitive, data-driven services and solutions, all in hopes of helping consumers reach their financial goals.

Deeper insights into spending and behavior

Banks are uniquely positioned to leverage the IoT to support banking consumers for one simple reason: These institutions can serve as both the payment processor of holiday spending activity and the secure location that houses a consumer’s financial assets. Unlike third-party solutions, banks can see both the spending side and the bank account side of a consumer’s profile and use that to drive better recommendations and insights that can improve customer shopping habits.

This ability to play both sides of the field offers a particular incentive for banks to build IoT-based mobile payment solutions that can replace third-party solutions such as Square. Their ability to gather additional consumer data gives banks greater opportunities to make appropriate recommendations, such as credit cards with better reward systems for their spending habits or personal finance coaching to get spending and budgeting under control.

Banks already have a range of outlets to build a network of IoT devices. In addition to mobile banking apps and consumer smartphones, banks might also consider developing additional payments processing hardware to be installed in stores. ATMs provide another outlet for IoT innovation: By leveraging consumer data to track shopping behaviors such as location, banks might even have a chance to track offline payments funded by cash dispensed from an ATM.

By building a network of interconnected devices gathering data in coordination with one another, banks can do more than just provide effective products and tools for managing holiday spending and personal budgeting through the calendar year. They can also wield this information in making risk management assessments when considering a loan or line of credit for a customer, helping them avoid risks that might not be present through a standard credit and background check.

A wary eye on future threats

If there’s any one force preventing banks from embracing the IoT as much as they would like, blame the fear of the unknown. With the IoT comes new security risks designed specifically for these new technologies. Some of them are known, others are not. Banks have to be careful that their new tech innovations don’t put consumer data at risk. The industry is highly regulated on its own, but a loss of sensitive consumer data would be a painful black eye to even the most powerful banking institutions, eroding consumer trust that would take years to rebuild.

Banks are sure to see wholesale industry changes driven by the IoT over the next decade, and with those advancements will come more innovative security measures. As Finextra reported, standard practices such as encryption and authentication tools will be paired with more cutting-edge solutions such as biometric identity verification, which uses mobile technology to verify users through fingerprints, eye scans and voice recognition software.

Managing these endpoints is crucial, but banks will also have to figure out how to prevent cybercriminals from wielding the IoT to break into their sensitive data stores. Solutions are on the way, but until they’re proven to be successful, financial institutions will be reluctant to put their customer data at risk.

However, even if certain applications of IoT devices remain a work-in-progress, banks are doing everything they can with the mobile technology available to build better services and products for consumers. During the spending-mad holiday season, such services are more important than ever.

Written By

Jonathan Crowl


Jonathan Crowl has served as a tech writer and reporter for a number of tech publications and corporations. Specializing in mobile technology and digital startups, he is based out of Minneapolis, Minnesota.

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