Pub. 8 2018 Issue 2

6 www.azbankers.org Internet of Things (IoT) w Continued from page 5 tensive. It is unlikely that any organization will be able to capture, analyze and apply this data alone. Partnerships with traditional analytics vendors, (such as IBM, SAP and Microsoft), cloud service providers, (such as Amazon Web Services and Alibaba) and system inte- grators will most likely be needed, accord- ing to Bain. This would especially be true in instances where Internet of Things data is only one of many data sources contributing to insights and decisions. Security and Privacy Concerns The ability to take advantage of the oppor- tunities of IoT requires the banking industry to overcome consumer concerns around data security and privacy. With massive amounts of data being collected, security is the top concern for both banking institu- tions and consumers. A survey of global business executives across a variety of industries by James Brehm & Associates found that 64 percent saw securi- ty as a barrier to IoT growth. This challenge was higher than both interoperability and the need to generate a positive ROI. While the banking industry is usually ahead of the curve when it comes to safeguarding customer data, the challenges are increased exponentially when you take into account connected devices and multiple processors of insight. Part of this challenge can be ad- dressed through consumer education around how IoT can actually improve authentication and security. The Digital Banking Report, The Power of Personalization in Banking found that con- sumers are becoming more willing to share personal information when they see big enough incentives and feel their data will be used responsibly. As the industry collects more and more insight, at some point, there’s a line where people may say it feels creepy to share too much information. The key is to be careful not to cross that line. IoT Questions to Consider The rapid expansion of the Internet of Things (IoT) offers an opportunity for bank - ing to facilitate payments beyond mobile phones, cards, and point-of-sale terminals. In fact, more transactions could eventually pass through connected devices than smart- phones. With Visa and MasterCard creating much of the underlying infrastructure, the industry is beginning to take shape. When beginning the development of an IoT strategy, executives can design their strategy by considering a few questions, according to Bain: • What segments should be prioritized? • Where can revenues and profits be generated revenue? • What would current customers value? Who will be the competition and is there a way to differentiate the offering? • What parts of the IoT solution should be delivered directly from the bank? Where will partners be required? • What capabilities are needed to deliver the solution? What are the priorities for development and investment? • What are the risks of doing nothing? While the direct impact of IoT may seem far in the future, many components are upon us already (invisible payments, smart home integration, virtual and augmented reality). Building a plan is essential as the Internet of Things gains traction and begins to impact consumers more and more over the next three to five years. w Jim Marous is co-publisher of The Financial Brand and pub- lisher of the Digital Banking Report, a subscription-based publication that provides deep insights into the digitization of banking, with over 150 reports in the digital archive available to subscribers. You can follow Jim on Twitter and LinkedIn, or visit his professional website. This article was originally published on January 16, 2017. All content © 2018 by The Financial Brand and is reprinted with permission.