Abstract— Internet of Things (IoT) is an ecosystem of connected devices (machines, sensors and other intelligent objects) with data gathering, analysis, intelligent decision making, and execution capabilities. This paper elaborates how IoT offers new business models in Banking & Financial Services organizations with capability to revolutionize products, payments, channels, business processes and asset management built on strong architectural foundation. This paper also elaborates how IoT stands to impact various business parameters including customer experience, cost and risk management within BFS organizations. We would also discuss an execution strategy, maturity model and using a reusable approach to achieve the scale as desired, while carefully considering enterprise security as fundamental pillar driving adoption.
Index Terms— Application Platform, Cloud Services, Sensors and Devices for IoT, Data Center Networks, Network Architecture, Service Functions and Management
I. INTRODUCTION
Michael Porter who is famous for concept of ’five forces’[1] that define industries and their attractiveness has published an article[2] in Harvard Business Review where he talks about how smart, connected products are transforming competition and describes how companies can evolve from making products to offering more complex, higher value offerings within “System of Systems”.
This change of perspective driven by transformative innovation offers potential to disrupt how consumers have been experiencing different products & services from banking & financial organizations. Within this transformation, Internet of Things (IoT) is now emerging out of hype and real value is emerging out of the solutions with everyday impact lifestyle. They are directly impacting business interaction with end customers.
Banks & Financial services organizations will look upon IoT to drive enhancements to service model, identifying how information is assimilated and delivered in new channels through innovation and personalization at customer touch points, along with improved operational efficiency that will align to business goals. This paper talks about why and how IoT will help Banks & Financial services organizations, elaborate frameworks, use cases and future of Digital Bank.
I. what is internet of things?
The Internet is expanding beyond the devices that are connected across the globe using sophisticated network of routers, switches through various protocols. Kevin Ashton who coined the term ’Internet of Things’1 described a system where Internet is connected to physical world via ubiquitous sensors. The paradigm change of information generated by machines rather than humans is promising a revolution in how machines can help us understand and change the world.
Bracing for all digital world of 25 billion connected devices by 2020 and $328 billion market for technology & services (Gartner survey), IOT will drive business transformation, economic changes in society. At broader level, it is a multi-layer ecosystem combining hardware, networking, storage & computing, apps & services, analytics with each layer contributing to the overall economics.
Some of the current broad applications of IOT include Smart Cities, Agriculture, Industrial Controls, Home Automations, Health & Insurance and Retail. Use cases are broadly grouped in fig 1.
Fig. 1. Use cases of IoT as applicable across industry segments
Startups are actively contributing to the overall ecosystem by continually exploring the use cases shown in Figure 1 and introducing new business solutions.. As a result, businesses across manufacturing, automobile, insurance, healthcare, transportation and logistics, and retail have already started taking advantage of this growing eco-system to enhance convenience and deliver personalized and contextualized interactions to their consumers. However, BFS organizations are yet to take full advantage of this trending eco-system.
I. fundamental elements of iot
Reimagining Banking and Financial Services’ business through IoT requires the digital forces – Mobility, Cloud, Social, Big Data Analytics, Machine Learning to be combined to create the fundamental elements that will drive Connected Device Ecosystem and their business applications:
1) Data Infrastructure to manage data collection
2) Data & Service Integration
3) Cloud for rapid Infrastructure scaling
4) Automated & Rapid Deployment
5) Data Security
The need is for a focused approach to blend internet-connected sensors, intelligence, and cloud services into new products integrated with legacy products and assets. IoT devices for BFS should be able to inter-connect via diverse networks through specialized radio services and integrate via micro-services to enable a logical segmentation of functionalities while providing and the capability to integrate simple and independent devices. Deployment of software code via container based approach models can enable production management at scale and security patch deployment on a need basis. Creating a segregated network for IoT devices will help BFS organizations build another line of defense against malicious attacks. However, focus and research on security aspects around IoT devices need to be accelerated to achieve enterprise-class data security
A. Architectural Principles driving build out and implementation
While the digital forces and the fundamental elements comprise of how the IoT can deliver value to the enterprise, there are architectural principles that should be considered for building the solution.
1) Security – At various layers starting from device, data transmission, authentication and authorization at interaction points
2) Scalability and Interoperability – a common information model and ontology with data integration driven by micro-services, REST, TCP/IP
3) Event Processing and real time analytics - to drive actionable insights.
4) Middleware/Gateway - for enabling REST/Micro-services for consumption
II. focus areas of iot
With IoT, Banks & Financial services (BFS) organizations could look at new ways to engage customers with their products & services more easily, greater agility and efficiency. Adhering to Simply & Improve themes, large banks are focusing heavily on cost structure optimization and identifying innovative areas to reduce cost. IOT technologies coupled with digital forces would help banks achieve innovative focus to improve customer experience and drive down costs
Fig. 2. Different Dimensions of BFS impacted by IoT
The different dimensions of BFS intersect at multiple points, with business processes being impacted by IoT across dimensions, at varying magnitudes. We elaborate on a few key possible use cases:
A. Smart Branch
Large banks have been maintaining significant asset base with branch that have been built over period of time or acquired. In the last few years, there has been significant focus to cut down & sell the branch assets. At the same time, focus on leveraging branch as an asset for deeper customer engagement has considerably increased. In this context, ‘Smart Branch’ as concept is proposed focusing on digitizing the experience and engaging customer through omni-channel strategies. Smart Branch will represent the brand and cross channel integration will be the norm with focus on educating customers to use self-serve mechanisms built on platform providing 360 degree service station for initiating & fulfilling all kinds of service requests. The target would be to have both banks and their customers look at the IoT platform as a means to elicit greater autonomy, efficiency, control and a greater degree of personalized interaction between the bank and the customer. This would necessitate mapping and identifying of opportunities for improvement or radical differentiation of customer experience in a smart branch. These opportunities should relate to customer expectations from branch banking. Some of the methods that banks can deploy to enhance customer engagement are:
· Enabling customized wearables to interact with the bank’s mobile app for identity and authentication
· Eliminating teller queues by enabling tellers to confirm when they are available
· Improving personalized marketing efforts by offering targeted offers to customers during branch visits
· Better tracking to generate data that sheds light on customer’s stay inside the branch, helping generate Key Performance Indicators (KPIs) around branch performance and customer interaction
· Leveraging telepresence robots to support customer interaction with mortgage specialist
Additionally, there is an opportunity to improve branch space utilization. An IoT enabled smart branch will utilize sensor devices like beacons to identify occupancy patterns and help arrive at an optimized pattern. By integrating with ‘smart energy’ techniques, the smart branch can offer a dashboard of energy usage too, with data sorted by various parameters like day wise usage versus after-hours usage, co-related with occupancy data. By using machine learning techniques on branch level data, branches will become ’smart’ by the ability to identify how to better engage with their customers. This will also equip branches with the capability to identify patterns of customer behavior based on transactions occurring in the branch and find ways to improve the cost structure by optimally utilizing the occupancy.
A. Smart ATMs
In a bid to improve customer experience, ATMs are being enhanced for enabling one touch transactions. Integrating with sensors, mobility, pervasive computing, ATMs can be enhanced to deliver additional benefits to customers. Possible smart ATMs capabilities are:
Bank mobile app to ATM communication via NFC/Bluetooth or alternate protocols. With this IoT enabling, ATM transactions can be executed over mobile, giving a greater sense of security to the customer. For e.g., a cash withdrawal transaction executed over mobile by a customer as he walks towards the ATM, will prepare the ATM for a one-step transaction (post authentication), customized for the transaction amount already entered and authenticated on mobile.
· Detection of ATM queues- A smart ATM will detect multiple people in front of the ATM and prompt the customer accordingly. This can detect potential security issues with a customer, automatically capture images/video, and inform law enforcement for help.
A. Payment Innovation
Banks have been driving new payment mechanisms, and have recently stepped up to become a part of mobile payments like Apple Pay. Going forward, banks will likely support the Samsung Pay mobile payment service, which is currently undergoing trials. IoT innovations in this area include apps for smart watches that will allow customers to check their balance. A few banks have also launched apps that allow funds transfer on smart watches. Possibilities in this area are still being explored, specifically around integrating payments into existing IoT themes like ’connected cars’ (enabling cars to act as payment hubs), smart homes (enabling payments by integrating payment processing through voice activated smart device controllers), and alternate wearable devices. Several customer segments including military personnel have expressed interest in conducting financial transactions through wearables.
B. Workplace Optimization
Workplace optimization is often part of CFO’s responsibility, where cost reduction is focus area. Cost optimization requires data around occupancy patterns, energy consumption patterns during weekdays, weeknights, holidays which can be obtained at building and floor level. This does not adequately justify the workplace utilization and energy consumptions, but CFOs lack adequate data to create appropriate analytics that will help them make right decisions.
Integrating sensor data through IoT, can help build consolidated energy view across multi-vendor BMS and occupancy management systems by building analytics of energy consumption patterns and occupancy patterns. Integrating with machine learning techniques, energy consumption can be reduced based on occupancy. Such a dashboard can directly be reviewed by CFO and with ability to drill down, pointed recommendations for cost optimizations can be made
C. Data Center Optimization
Operational Risks such as improving data center oversight, system infrastructure or hardware failure, malicious acts involving physical damage are key focus areas for banks who are still owning their data centers. Integrating sensors for gathering server information with machine learning algorithms, data centers would be able to obtain a view around probability of infrastructure failure along with probable time to failure. This integrated with alert generation system would help support a Data Center Oversight program to drive operational risk remediation.
I. Maturity model
Striving for continuous improvements in the architecture necessitates tracking of progress in accordance with a maturity model. The essential components of this model correspond to varying level of maturity scores against the below parameters:
a. Asset Management: This involves planning of the devices, network, infrastructure, software required in place to implement the solution. It also requires to track the exact location where the asset is placed (eg, Beacon can be placed in specific area in house or workplace and the same should be available in an accessible repository). This coupled with asset monitoring – health, connectivity to corporate IoT network completes asset management as function.
b. Compliance: It is imperative to review compliance requirements pertinent to security standards, environment, regulators, and government - specific to region, country. Establishing appropriate control points will help build an oversight mechanism – driving alignment of data source with enterprise risk strategy, change management of documentation, procedures and data infrastructure.
c. Scalability and Agility of Underlying Infrastructure – Adherence to Micro-services/REST APIs over monolithic architecture are typical parameters that exhibit agility & scalability of an IoT architecture
d. Features/Flexibility – The overall architecture should offer capability for apps to be developed on top of the data being collected from multiple devices.
e. Analytics and Insights Driven - The system should provide an ability to create & define dashboards that can help various stakeholders across the entire value chain. Ability to tie multiple data sources, creating an insightful and actionable analytics would be key to deriving business value out of the solution
f. Partnership and Ecosystem – Very often a differentiating factor is the ecosystem created with a combination of partners – devices, software and hardware as well as service providers and their overall alignment to business environment.
The IoT solutions could leverage the above maturity model framework to construct and build a realistic roadmap that will be in alignment with the projected market as well as changing realities in underlying technology & standards.
II. driving adoption
Monetizing Internet of Things is an important aspect that drives increased adoption. Besides helping achieve cost optimization and customer experience, data captured during customer interaction offers additional possibility of improved customer engagement. Being able to capture customer interaction and events with IOT being another channel, it opens up possibilities for understanding customer preferences and additional avenues for revenue generation. However, optimizing IoT for effective customer engagement requires a standardized approach to define and achieve the goals of the connected bank. Applying concepts of ‘Design Thinking’ we suggest a high level framework that would help define the vision and execution strategy. The framework as detailed below elaborates a step by step methodical approach to identify the use case and the corresponding value proposition, create an ability to determine ROI and implementation model that will allow scalability and reusability with adequate consideration of risk and security as applicable for the use case.
The framework comprises of below steps:
1) Baseline Value
Capture technology, products, experience gaps at story level
2) Map Opportunity
Enable radical differentiation for dimensions under consideration.
3) Risk Management
Create security framework for opportunities in scope
4) Data & Analytics
Identify data sourcing based on business analytics expected to drive ROI measurements.
5) Factory Model
Continuous build & deployment using repeatable process
With the right combination of Fundamental Elements (as mentioned above) with an execution strategy, we can have the ability to create differentiation and improved customer experience through innovative products.
II. Areas of improvement
Within BFS organizations, key inhibitors for IoT adoption are security and privacy. A recent P research study reported that the average Internet of Things has an astounding 25 security flaws and 70 percent have at least one such vulnerability. With increased focus on operational risk and business continuity risk, there is a need for improved security controls, vulnerability management, data security strategy, asset management, Access/Entitlement management. IT security systems will have to be enhanced considerably as patch updates, software updates and patches are extremely complicated for small sensors, wearable that constitute the world of IOT.
There have been cases of IOT devices spreading malware or being vulnerable to external attacks, cases of forgotten assets, privacy concern driven by changes in attack techniques and emerging vulnerabilities. Hence, to realize the value of the opportunity provided by Internet of Things, security is a foundational activity and it can be achieved by continued efforts of harmonization of device manufacturers, standardized software & protocols for IOT with shared responsibility of security. Additionally, security organizations would have to invest and build capability around managing a broader set of interconnected devices that will help to counter any malicious attack. However, security still continues to be larger research subject, with new standards emerging from Industrial Internet Consortium, Open Interconnect Consortium, International Standards Organization and IEEE with IEEE P1363 – standard for public key cryptography, IEEE P1619 – encryption on storage devices, IEEE 802.1X – media access control security. The IoT solutions would have to consider these standards and incorporate them in their roadmap as they evolve.
I. Conclusion
As the digital transformation wave continues, we anticipate that technology will help us overcome the inhibitions and make the world a more connected place. Driven by changing business and economic needs, we see a world that will evolve into a collective and overlapping consciousness driven by devices and robots, akin to the way we try to influence each other through emotions, using social media. There will be epiphanies that will inspire people to newer innovations and help build a world that will enable humans and machines to exchange data and thoughts, giving way to a whole new BFS environment that has not yet been imagined. Are we ready for the future yet??
References
[1] K. Ashton, “That ‘Internet of Things’ Thing” RFID J. Jul 2009. [Online]. Available: http://www.rfidjournal.com/articles/view?4986
[2] M. Porter and J. Heppelmann, “How Smart Connected Products are transforming competition” Nov 2014. [Online]. Available: https://hbr.org/2014/11/how-smart-connected-products-are-transforming-competition
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