How Is IoT Shaping FinTech in 2023?

Connected technologies continue to revolutionize modern industries, and the banking and financial industry is no exception. With the advent of digital solutions and artificial intelligence (AI), we’re seeing a major transformation in financial services. 

On top of it all, the Internet of Things (IoT) in financial technology (FinTech) is expected to develop further in the following years.

According to Global Trade, its global market is projected to rise at a compound annual growth rate (CAGR) of 13% from 2023 to 2033, with a whopping worth of $165.17 billion this year. 

IoT and Its Application in FinTech

The Internet of Things (IoT) is the growing network of physical and electronic devices, or “things,” that are connected to the internet.

They’re built with sensors, software, and other technologies to connect and share data with other devices and systems online. 

In FinTech, IoT-enabled devices are typically used as a mobile point-of-sale system, which enables customers to make payments anytime, anywhere.

They’re also used as a cybersecurity tool, securing the process and encryption of payment information. 

Real-time data gathering is also at the heart of IoT technologies. It funnels information to the cloud which helps banks track, monitor, and report activity on a client’s accounts more accurately.

It also provides clients with the most up-to-date transaction details and keeps them abreast of the lines at their local branch.

The IoT helps the banking and FinTech industry become more efficient, reliable, and secure. The following are a few examples of how IoT-enabled technologies will shape the FinTech industry this year.

Instant and Cashless Mobile Banking 

Although the COVID-19 pandemic crisis has eased up, research shows users will keep using mobile banking to make deposits, obtain loans, and track their spending and earnings.

One main reason for this is the instant cashless payment people can make through mobile banks. 

Another is mobile banking’s biometric security. It allows users to access their mobile accounts through fingerprint scanning, facial recognition, voice detection, and even iris scans.

Users and FinTech companies are leaning into biometric security because:

It’s much safer than traditional passwords and PINs, helping companies decrease fraudulent account access by criminals; and 

It’s much faster and easier to do, compared to remembering and punching in passwords and pins. 

These perks also made mobile banking a key differentiator for several banking and FinTech leaders. In fact, it’s predicted to have a healthy CAGR of 29.0% between 2020 and 2027 and a worth of $8.94 trillion by 2027. 

Faster Banking on Wearables 

In addition to mobile banking, the demand for wearable banking is taking off. As consumers continue to look for faster, more frictionless transactions, its market size is expected to grow at a CAGR of 13.6 % from 2023 to 2029.

This growth is mainly driven by the need for contactless payment options and the increasing popularity of wearables. 

Wearable banking is done through wearable payment devices, such as smartwatches, wristbands, fitness trackers, payment processing rings, and even glasses.

To make contactless payments, users must connect these wearables to their bank accounts using services like Apple Pay, Samsung Pay, and Google Pay. 

Until recently, these wearables could only enable users to make payments, provide transactional alerts, and give quick reports on the user’s account balances.

However, due to the increasing adoption of wearable devices in banks and FinTech, advanced features like stock purchasing can now be done with wearables. 

Customer Retention Through Data Analytics 

IoT-enabled data analytics help FinTech companies efficiently track, collect, and analyze actionable, data-driven insights.

The gathered data can generally help them to understand consumer behaviors, allowing them to make better-informed decisions on their products and services and identify new opportunities for revenue generation. 

Additionally, based on the gathered data, financial companies can: 

Improve operational efficiency by identifying areas of inefficiency and augmenting operations accordingly;

Improve marketing by identifying customer segments, understanding their needs, crafting targeted marketing campaigns throughout multiple channels, and minimizing business threats and financial waste by making informed decisions. 

Automation Increases Business Efficiency 

IoT-powered systems automate tasks such as requests, opening bank accounts, disabling credit cards, and many more. These can help simplify day-to-day functions and minimize human intervention, resulting in fewer human errors and improved customer service. 

For example, in accounting, a client’s payment system and a certified public accountant’s (CPA) FinTech software can implement IoT-enabled communication. It facilitates automating data entry, reconciliation, invoicing, and other routine bookkeeping processes. 

Automated accounting ensures real-time, quick, and secure data exchange between a client and the CPA.

It also helps the CPA gain accurate insights into the client’s operations, which is beneficial for improving advisory functions, managing audit trails on the fly, revealing data inconsistencies fast, and preventing fraud. 

Final Thoughts 

In recent years, IoT has simplified everything in the finance industry over the past several years, from enhancing customer service to increasing business efficiency.

As it continues to shape the way banks and FinTech companies operate, it’s essentially the next phase of the digital revolution.