Custom Image

IoT in Finance: Benefits and Use Cases

31 March, 2022
5 min read
Rachelle Fisher, AVP, Digital Transformation
Linkedin profile

What you'll learn

  • Using IoT technologies to collect and share data saves time and improves efficiency
  • IoT is widely used to facilitate contactless payments between two devices
  • Ensuring strong data management facilities and cybersecurity measures is key for successful IoT implementations
What is IoT?
Benefits of using IoT in finance
Use cases of IoT in Finance
Next steps: Implement IoT and automate your financial services
Print Bookmark

Internet of Things (IoT) technology is widely used across manufacturing, healthcare, agriculture, financial services, hospitality, and retail industries. IoT technology connects everyday objects—watches, phones, industrial equipment, buildings, and more—to the internet, allowing them to connect with each other, conduct transactions, and share information.

IoT makes machines smarter, and your processes more efficient. In this article, we look at how to use IoT in finance. We’ll discuss various use cases such as IoT payments and fraud detection as well as offer tips to ensure successful IoT implementation.

What is IoT?

The Internet of Things (IoT) is a rapidly expanding network of linked devices that use embedded sensors to collect and exchange data in real-time. In recent times, IoT has provided the fintech industry with a significant boost, particularly in terms of security and payment processing.

Devices embedded with sensors and other IoT technology mechanisms are used as mobile point-of-sale systems (e.g. contactless cards). IoT also helps finance teams collect and share data easily and use it for making better decisions on investments, insurance amounts, customer risks, etc. IoT supports and elevates customer experiences. The data collected by IoT devices also helps detect fraud and cyber threats.

IoT in BFSI growth rate

IoT helps finance companies save time and money by gathering and transferring data efficiently. It helps automate core processes through efficient collection and processing of information. IoT also helps financial institutions improve their customer experience to a large extent.

Benefits of using IoT in finance

IoT helps collect data from multiple sources to help improve decision-making. It also supports machine-to-machine communication, thereby automating a variety of tasks.

Let’s look into the benefits of IoT in finance in detail.

Faster decision-making

Many business decisions including investment decisions are based on in-depth data analytics, business pattern analysis, and market research. Businesses can use IoT devices to collect and analyze clients’ data to gain valuable insights into their needs. Therefore, along with technologies like AI, ML, and RPA, IoT helps the finance department make informed business decisions.

Streamlines F&A operations

Finance and accounting (F&A) processes involve the collaboration of different departments for the efficient collection of information. Instead of manually collaborating, companies can automate the whole process. The information can be collected and updated to the cloud in real-time using IoT devices. This helps save time and effort that would otherwise have been spent in collating data from multiple teams.

Improved efficiency

IoT helps to track employee and business performance in real-time. IoT devices like wearables help to track productive hours as well as alert you if anything is amiss. It also provides data to check whether your devices such as ATMs, customer kiosks, etc. are working efficiently.

Use cases of IoT in Finance

In this section, we discuss areas in finance processes that can be streamlined or automated with IoT devices and technology.

1. IoT payments

IoT payments refer to payments made by a device, without human intervention, based on a set of rules.

IoT payments platforms allow customers to pay their invoices through a variety of devices not limited to contactless cards, smartphones, and smartwatches. Enabling IoT payments in your accounts receivable process can help elevate customer experiences and make the payment process smoother.

2. Customer service

IoT devices help provide prompt customer assistance to customers. For example, smartphones (an IoT device) can notify account managers or customer relationship managers when a customer walks into your office. This helps you address customers’ concerns quickly and gain their trust and loyalty.

IoT devices can also help customers navigate your office premises by providing them the directions to the right executive. (e.g. Citibank allows customers to open doors at ATMs with their mobile phones). IoT technology also supports identity management (e.g. Nymi smart wristband utilizes an individual’s heart rate for biometric authentication) and electronic ticketing for query resolution.

Diagram of IoT-Chatbot system

Overview of IoT-chatbot system (Source)

3. Credit risk management

Gather real-time data of clients’ assets using IoT to improve your credit-risk management. It also helps send alerts and notifications to your salespersons and finance teams when they deal with high-risk customers. This will help keep bad debt at a minimum and improve ROI.

4. Fraud detection

Banks and financial institutions are prime targets of hackers. IoT devices coupled with machine learning (ML) applications help detect anomalies by collecting data from various machines and web applications including payment portals, servers, teller machines, etc. This helps quickly identify instances of fraud and money laundering and take necessary corrective actions.

5. Auditing

Auditing is crucial to identify any irregularities in the finance processes or to uncover fraud. Traditional auditing methods involve a ton of paperwork.

With the help of IoT, all the transactions can be tracked in real-time and sent to the accounting department. Using IoT, the accountants can easily track the audit trails of all the employees or business units, whether they make a purchase or receive money in real-time. This streamlines the accounting process and lowers the efforts that are otherwise needed for the auditing process. This also ensures that the accounting procedure is efficient and error-free.

Next steps: Implement IoT and automate your financial services

In this section, we’ll look at some tips that can help you implement IoT successfully in various finance functions.

  1. Look for proven use cases: Identify areas within finance functions where IoT is used commonly. These are proven use cases of IoT implementation within finance and pose fewer risks. For example, payments is a key area where IoT technologies are widely used.
  2. Improve data management: Strengthen your data management structures. Implementation of IoT technologies generates many million gigabytes of data. Therefore ensuring that you have data structures and governance rules that can handle such volume of data securely is important.
  3. Implement adequate security measures: Protect your IoT ecosystem with the necessary cybersecurity measures. IoT devices tend to have weaker defenses and are easy targets for hackers. Ensure that you work with your IT consultant to add other necessary security measures.
  4. Track return on investment (ROI): IoT investments are often expensive and hence ensuring that you’ve spent your capital wisely is crucial. You can look at parameters such as how IoT has boosted customer service or reduced the times for audits when you look at ROI numbers.

Interested to know more about emerging technology adoption use cases in finance? Check out the blogs:

Most Popular Resources

All Topics
Accounts Receivable
Talk TO Our Experts

Streamline your order-to-cash operations with HighRadius!

Automate invoicing, collections, deduction, and credit risk management with our AI-powered AR suite and experience enhanced cash flow and lower DSO & bad debt

Talk to our experts

HighRadius Integrated Receivables Software Platform is the world’s only end-to-end accounts receivable software platform to lower DSO and bad-debt, automate cash posting, speed-up collections, and dispute resolution, and improve team productivity. It leverages RivanaTM Artificial Intelligence for Accounts Receivable to convert receivables faster and more effectively by using machine learning for accurate decision making across both credit and receivable processes and also enables suppliers to digitally connect with buyers via the radiusOneTM network, closing the loop from the supplier accounts receivable process to the buyer accounts payable process. Integrated Receivables have been divided into 6 distinct applications: Credit Software, EIPP Software, Cash Application Software, Deductions Software, Collections Software, and ERP Payment Gateway – covering the entire gamut of credit-to-cash.

Thank you for signing up! Stay tuned :)