IoT – Revolution or Evolution in the Banking or Financial Services Industry

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1. The IoT Hype

​We have all heard about the “Internet of Things” (IoT) and the revolutionary technologies that promise to transform our daily lives. Yet how significant is this shift, and what real influence can it exert on the Financial Services Industry?

The Internet of Things (IoT) refers to any object capable of collecting data and sharing that information—such as status or geolocation—over the internet. Communication often occurs directly between devices rather than involving people, a process known as Machine-to-Machine (M2M) communication. Familiar examples include smart thermostats, home security systems, fitness trackers and wearables.

Although these scenarios may once have seemed futuristic, smartphones, tablets and smartwatches are already fully fledged IoT devices. The smartphone, in particular, continues to serve as the central hub of the connected ecosystem.

IoT carries major implications for both the business and IT functions of financial institutions. Flexible execution frameworks and high-performance runtime platforms are becoming essential requirements.

2. Where Does IoT Impact Us?

​Fundamentally, IoT enables companies to deliver more personalised products and services tailored to individual customer needs and preferences. It also allows organisations to capture vast quantities of real-time, 24/7 data about customer behaviour.

This continuous data flow supports a deeper understanding of each client. Consequently, IoT is set to revolutionise data analytics by converting constant streams of information into immediate insights and forward-looking predictions about customer preferences and actions.

The Financial Services Industry, being inherently data-driven and offering intangible products, will experience fewer direct effects than sectors such as retail. However, the indirect benefits—leveraging IoT data to refine financial products and services—will be substantial and far-reaching.

In insurance, IoT offers a powerful way to increase customer engagement, which traditionally remains low compared with banking. Clients currently interact with insurers mainly at policy renewal or when filing claims. IoT enables insurers to build ongoing, value-added relationships by embedding new services alongside traditional coverage.

3. Use Cases

The new solutions and products that IoT will generate in financial services are difficult to predict and limited only by imagination. Use cases can be organised along two main axes: the purpose for which the delivered IoT data is used, and the type of data the device transmits or receives.

​The usage of the delivered IoT data:

1. Creation of innovative, personalised products and services
2. Enhancement of risk management (for example, improved fraud detection or better monitoring of loan collateral)
3. Optimisation of sales processes and customer relationships through more precise segmentation and contextual offers
4. Automated execution of payments by connected devices
5. Improved identification and authentication of customers

​The type of data the IoT device sends or receives:

1. Condition or usage of the monitored object or person
2. Geolocation
3. Payment data
4. Biometric data
5. Customer communication (human-readable information)

The remainder of this article is structured according to the first axis—the intended use of the IoT data.

3.1. Delivery of Innovative Products and Services

IoT will enable entirely new, highly personalised financial products and services that would be impossible without the underlying sensor data.

3.1.1. Home Sensors

Linking home sensors to a financial institution opens multiple new service opportunities. Utilities smart meters (gas, water, electricity) connected to a bank account can trigger automatic bill payments and help customers switch suppliers for the best rates.

​Connecting a broader set of home sensors—smoke detectors, carbon-monoxide alarms, fire-suppression systems and advanced security systems—to an insurer allows the provider to:

1. Reduce risk by improving home safety and thereby lowering claim frequency
2. Offer usage-based, personalised premiums that reflect actual behaviour
3. Alert policyholders via smartphone when an incident is detected and automatically dispatch emergency services
4. Provide customers with real-time dashboards showing utilities consumption and home status
5. Recommend home improvements that could further reduce premiums

Banks can also use structural sensors to assess the condition of a property used as loan collateral, enabling automatic renovation loans and variable-rate products linked to maintenance quality.

3.1.2. Car Sensors (Telematics)

Telematics data is already being used by insurers today. Driving-behaviour metrics allow usage-based car insurance, fraud detection, gamified safety coaching, breakdown assistance and fleet-management services for SMEs. Banks can similarly adjust loan rates according to vehicle condition and remotely manage collateral in case of default.

3.1.3. Personal Health Sensors

Wearable health sensors measuring heart rate, body temperature, blood pressure, activity and alcohol levels enable insurers to create truly personalised life and health policies, support medication adherence, assist elderly customers and provide real-time health insights while respecting strict privacy standards.

3.1.4. Supply Chain Sensors

Sensors tracking inventory levels, goods condition and shipment status help banks refine credit decisions, monitor collateral and improve forecasting. Insurers benefit from better risk pricing for transport and corporate policies, while both banks and insurers can offer clients live dashboards and automated anomaly alerts.

3.2. Fine-Tuning of Risk Management

IoT data strengthens Know-Your-Customer processes, credit-risk models, collateral monitoring, insurance underwriting and fraud detection. Real-time geolocation, for example, can instantly verify transaction legitimacy or flag suspicious insurance claims.

3.3. Supporting Sales and CRM Processes

Beacons, geolocation and health sensors allow banks to recognise customers the moment they enter a branch or specific location, deliver contextually relevant offers and time sales conversations more effectively.

3.4. Automatic Payment Execution

Connected devices can autonomously order goods and initiate payments—refrigerators restocking themselves, cars paying at charging stations or smart assistants purchasing tickets—driving demand for faster, lower-cost payment rails and secure device-to-account linking.

3.5. Identification and Authentication

Biometric and behavioural data from IoT devices—iris or face recognition, phone-handling patterns, location history and usage behaviour—provide stronger, multi-factor authentication that complements traditional PINs and passwords.

4. Required IT Capabilities

Financial institutions must modernise their technology foundations to handle continuous, high-volume IoT data streams. Real-time processing, 24/7 availability, scalable cloud architectures, robust security and privacy controls, and flexible integration frameworks are now essential.

5. Conclusion

​IoT devices and the data they generate are steadily becoming central to the products and services offered by banks and insurers. While many applications remain in pilot or early-adoption phases as of 2026, exponential growth is expected in the coming years.

Institutions that modernise their data architectures and embrace DevOps, Agile, cloud and microservices practices today will be best positioned to capitalise on the opportunities IoT presents.

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