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The IoT, an interconnected ecosystem of internet-enabled objects—networks, devices, sensors, microprocessors, machines, data hubs, artificial intelligence software and analytics programs—already has many applications in the financial services industry.
Whether it’s tracking driving habits for the purpose of offering insurance discounts, using biometric data to confirm an ATM user’s identity, using sensors to determine the condition of loan collateral, or remotely disabling a car that is slated for repossession, the financial services IoT is ushering in an era in which “smart” things can seamlessly collect, share and analyze real-time data, as explored in a new eMarketer report, “The Internet of Financial Things: What Banking and Insurance Industry Marketers Need to Know Now.”
Studies that assess the market size and growth potential for IoT in the financial industry generally agree that there is substantial investment, with healthy growth expected to continue over the next several years.
An April 2015 survey of global executives across a variety of different industries conducted by Tata Consultancy Services (TCS) found that respondents in banking and financial services predicted that average IoT per-company spending for their sector would grow to $153.5 million by 2018, up nearly 31% from $117.4 million in 2015. Respondents in the insurance industry expected their average per-company budgets to rise about 32% between 2015 and 2018, from $77.7 million to $102.9 million.
While some banks, payments companies and insurers—particularly larger players—are aggressively investing in IoT technologies, not all industry firms have jumped on the bandwagon yet. An August 2015 poll of IoT decision-makers worldwide by International Data Corporation (IDC) found that just 43% of respondents in the finance industry were familiar with the IoT. This compared with 56% in the retail industry, which had the highest percentage of those in the know. Despite this relative lack of knowledge, the same study found that 58.4% of finance-industry decision-makers viewed the IoT as a “strategic” initiative, compared with 20% who believed it was “transformational.” Perhaps more significant, only 5.6% of respondents said it was unimportant.
On a similar note, an August 2015 study by Efma and Infosys found that 47% of banks worldwide assigned the IoT high importance as a disruptive technology. It ranked fourth on the list, behind mobility (59%), advanced analytics and big data (57%) and open APIs (53%), all of which are necessary for the IoT to function.
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