Data-driven fintech and the IoT evolution
The use of data and innovative IoT technologies is rapidly changing the financial sector, including allowing greater insight into the customer
The financial services sector has used customer and contextual data to make better, more informed decisions for many years.
With that in mind, it gores without saying that the more data an organisation can gather, the better it can protect its interests and create value for itself and its customers.
Today, 3.5 billion people own and use a smartphone which collects massive amounts of data from a single endpoint. In fact, the rate at which we as a species create data is exponentially increasing.
It’s estimated that 90% of all the data in the world was created in the last two years, for example.
Internet of Things (IoT) devices may help us process payments, monitor metal fatigue and know when to order printer ink, but all those applications are, at their core, data gathering.
IoT devices are sensory endpoints that collect information about the world around them - examples include smart devices, wearables and more.
With the number of such devices set to increase dramatically over the coming decade, the amount of data available to everyone from retailers to insurance agencies is set to experience another exponential hike.
Deeper and more granular insight
In the fintech sector, this information is expected to be invaluable.
According to Jordan McKee at Forbes, “longer-term, the latent – and more lucrative – IoP revenue opportunity will be found in harnessing the explosion of new data inputs that can provide deeper and more granular insights on customer behavior."
McKeen added: "The opportunities for new data streams generated by IoT devices and sensors are endless and will serve to bolster decision-making accuracy in areas ranging from fraud prevention to ‘know your customer’ (KYC) requirements, to lending to targeted offers and recommendations.”
One of the most important ongoing conversations in the world of tech revolves around privacy and information security.
As the amount of data in the world grows - and companies take further steps to harness and capitalise on the value of that data - global cybersecurity efforts need to keep pace with increased risk and higher stakes.
In 2018, the Mirai botnet attack saw teen scammers take advantage of insecure IoT devices to effectively take down the internet across much of the eastern United States. Companies - particularly in the finance and payments sector - need to recognise that increasing IoT capabilities means increasing security as well.
Case study: Armis
Founded in 2015, Armis is a silicon valley cybersecurity firm focused on IoT threat prevention.
“The promise of productivity and collaboration with all these new devices can only come to fruition if they are safe and secure,” commented Yevgeny Dibrov, CEO & Co-Founder of Armis.
Dibrov’s company provides IoT security solutions to the finance, healthcare, manufacturing, retail and smart city development sectors.
The Armis platform is the first agentless, completely passive security platform to tackle the IoT security space, using the company’s unique technology stack to continuously discover and profile devices in the client’s environment, analysing their behavior to identify risks and attacks autonomously.
For more information on all topics for FinTech, please take a look at the latest edition of FinTech magazine.
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FIVE things fintechs must do to keep investors onboard
New investors flocked to the stock market during the COVID-19 pandemic. Thirty-eight percent of investors said they had never had a brokerage or similar account before opening one in 2020.
Low or no-fee trading options have helped accelerate the trend – nearly half of new investors said they accessed their account primarily through a mobile app. As FinTechs, how do we create the trust needed to keep new investors in the market and create a fruitful customer experience for them?
The financial industry does a disservice to individual investors if we merely offer tools that focus on making money quickly, an approach that usually backfires. Instead, the surge of interest presents an enormous opportunity for those who want to help more consumers use financial technology to educate them on responsible spending, saving, and investing in order to achieve financial wellness current fintech tools have welcomed individual investors in the door.
Now, it’s time to focus on education and improving their experience going forward. There are several ways those of us in fintech can step up to shape the future of retail investing so that it works better for everyone, starting with the following areas.
Equal access to financial wellness education
Financial health should be available to everyone — but today, not everyone has the educational resources to achieve it. One study shows that only 3.9% of students from low-income schools were required to take a personal finance class. What they aren’t learning in school or from family members, fintech companies can provide on their platforms.
The companies should move from solely offering financial services to a more responsible model of education, advice, and prescriptive choices to help consumers develop better habits and make wiser financial decisions. Not only can they empower consumers and bridge historical wealth divides, but they can also stimulate growth by opening up new consumer segments.
Just as we’ve come to expect that our fitness routines are tailored to our individual bodies, we’re also ready for finance tools that go beyond one-size-fits-all solutions. But only six percent of financial institutions say they’re using the kind of technology that allows them to deliver a deeply personalized experience. Fintech tools need to reflect that financial success looks different for each of us.
For one consumer, it may mean providing guidance on how to pay off student loans early; for another, it may mean prescriptive actions that enable them to stick to a budget for the first time; for a third, it could look like prioritizing environmental, social and governance (ESG) investments, so that her portfolio aligns with her political beliefs.
Now, we are seeing financial technology beginning to meet the demands of personalized finance in a substantial and meaningful way.
The rise of AI-Powered Advice
Big-picture advice and predictive guidance used to be a feature of high-end financial advisory firms — a perk only available to those who could afford it. But thanks to rapid advancements in data analytics and artificial intelligence (AI), that kind of holistic advice is now more accessible than ever. AI-driven robo-advisors can parse many different streams of financial information, delivering customized answers to key questions: Is it time to buy a home, or is it smarter to keep renting? Can I afford to take out another student loan?
Intelligent connectivity powered by AI can anticipate consumers’ needs and next steps, making proactive suggestions that guide them along the path to financial wellbeing. Fintech companies can also help consumers identify when their financial picture becomes too complex for a robo-advisor, and help them find a human financial advisor to meet their needs.
Focus on financial mental health
New investors are quickly finding that the market can be overwhelming. That’s not surprising, financial anxiety is common and studies show that financial stress can have an impact on mental health for some.
It’s not enough for fintech companies to give retail investors access; they also must provide the guidance and support that help consumers manage their financial well-being. Educational tools can ensure that consumers are well informed about their options.
Predictive analytics can anticipate consumers’ questions, serving them key information and insights before they ask. Features that emphasize a comprehensive notion of financial well-being, rather than short-term wins and losses, can also help ensure that consumers are keeping their eyes on the bigger picture.
Gamification for good
The surge of gamification apps has done an impressive job making investing as engaging as playing a video game or joining a social media platform.
Much of the current use of gamification emphasizes short-term thinking, but there’s also an opportunity to help consumers think more broadly about their overall financial picture. One example is peer benchmarking, a feature that enables help consumers to see how their financial habits compare to those of friends and fellow consumers.
Gamification can also be used to incentivize making smaller, smarter choices — for example, rewarding saving over making an impulse buy.
The future of fintech is about more than just broadening access to the markets. It’s about making sure more individuals have access to the tools that can help improve their financial well-being—in the ways that suit their own circumstances and needs. The potential to act within their own set of individual priorities, with their long-term financial wellness in mind is much more empowering to a consumer than simply relying on short-term, high-risk investments.