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The Future of the Financial Industry: Tech Trends and Their Potential for Banks and Insurance Companies

Picture of Géraldine Wymann Géraldine Wymann : Jun 3, 2024 3:25:50 PM

finance & insurance IoT AI Wi-Fi Big Data
The Future of the Financial Industry: Tech Trends and Their Potential for Banks and Insurance Companies

 

What awaits the Head of IT in Banks and Insurance Companies in the year 2024?

IoT, Telematics, Usage-Based Insurance, Open Banking, and Big Data Analytics: How Wi-Fi is Revolutionizing the Financial Industry

The integration of Wi-Fi technologies like IoT, telematics, usage-based insurance, and open banking is profoundly influencing the financial sector. Banks and insurance companies are harnessing these advancements to enhance their services, personalize customer experiences, and streamline internal processes. However, these transformations also bring forth new demands on wireless infrastructure, necessitating reliable connections, robust data security, and scalable capacities. Explore our blog to learn how these technologies are reshaping the future of banking and insurance and what considerations you should keep in mind.

Big Data

 

 

Trend 1

IoT, Telematics, and Usage-Based Insurance & Finance

According to Business Research Insights, the global market for the Internet of Things (IoT) in the banking and financial services sector is experiencing significant growth and is projected to reach a value of $6,781.7 million by 2028, with an annual growth rate (CAGR) of 30.4% during the forecast period. Below are some key IoT trends for the finance and insurance industries.

SMART BANKING AND PAYMENT SERVICES

The adoption of intelligent ATMs and payment terminals equipped with IoT sensors and connectivity is on the rise. These devices offer secure and convenient banking services, enabling customers to carry out transactions seamlessly. With IoT technology, customers can manage their banking affairs securely and conveniently without relying solely on traditional payment methods. By incorporating IoT sensors, these devices can offer a range of functions, including card readers, ATM services, cash withdrawals, account statements, and more. IoT-based intelligent ATMs and payment terminals provide a secure transaction environment and offer customers a seamless experience. This eliminates the need for physical cards or PIN codes, enhancing overall comfort and efficiency for customers.

REAL-TIME MONITORING AND PREDICTIVE MAINTENANCE

Financial institutions are leveraging IoT devices to monitor their infrastructures in real-time. These devices continuously collect data on the condition of machines and equipment to identify potential issues early and implement preventive maintenance measures.

ASSET MANAGEMENT AND FRAUD DETECTION

IoT applications in asset management and fraud detection enable real-time asset monitoring and data analysis to identify fraudulent activities promptly. The collected data must be transmitted quickly and securely, with reliable Wi-Fi connectivity ensuring efficient communication between IoT devices and the bank's network.

TELEMATICS AND USAGE-BASED INSURANCE

Telematics and usage-based insurance provide insurers with the opportunity to utilize customer behavior and vehicle data to tailor policies based on real-time data and individual risk profiles. For instance, vehicle insurance providers can analyze customer driving behaviors to optimize UBI programs. Telematics technology enables insurers to gather precise information on driving behaviors and incentivize safe driving habits with lower premiums. This benefits both customers and insurance companies.

What our Experts have to say
"Agrisano uses IoT devices to continuously monitor the temperature in its own data center. If the temperature reaches a critical value, the backup air conditioning system starts automatically. Furthermore, we are alerted by SMS about technical problems in the area of air conditioning, power outages, fire alarm systems, and smoke detection through VESDA in the server room. These measures allow us to detect potential problems early and take preventive action.

As we place great importance on security and have invested a lot of work in 2023 into a finer division of networks (VLAN) and corresponding firewall rules, IoT devices and their usage are thoroughly reviewed. In principle, these are operated in a "building technology perimeter" and only receive the access that is truly needed. The separation from the productive operation is very important."

André Peterhans, Head of IT Operations, Agrisano Health Insurance AG

"The need for a seamless and secure banking experience has become even more important in an increasingly digital world and is an essential part of the financial services industry. Extreme Networks' Wi-Fi solutions serve as an essential foundation for the integration and monitoring of IoT devices and telematics. With unparalleled connectivity and reliability, our solutions enable financial institutions to fully leverage the potential of emerging technologies. This enhances operational efficiency, improves customer experiences, and ensures they stay one step ahead in a dynamic market environment."

Giuseppe Casblanca, Sr. Systems Engineer at Extreme Networks (CH)

"The strong increase in technological solutions for customer care and service provision in the financial industry poses increased demands on the network infrastructure, especially on wireless capacity. The trend strongly favors the use of mobile devices, IoT, and communication without temporal or spatial constraints. To meet these trends, a flexible, secure, and highly scalable network coverage must be in place. Only in this way can it be guaranteed that data is available at all times and in the desired quality and does not fall into the wrong hands. Close collaboration with IT security experts and network specialists is essential to provide the right wireless network solution and thereby achieve business benefits."

Martin Niemann, Sales Director Zurich and Member of the Executive Board at BNC.

 

 

Trend 2

AI-Driven Consultation and Wealth Management

Banking fundamentally relies on trust established over decades, now intertwined with bits and bytes in its digital core. With such a digitally driven model, there arises an unparalleled opportunity to deploy AI in all its forms. While these technologies may not completely reshape the bedrock of banking, they are set to dramatically influence nearly every facet of its operations:

THE ASCENT OF GEN AI

In 2023, many banks commenced trials with Gen AI, yielding remarkable results. Over the ensuing 12 months, a broader adoption will unfold across various organizational domains. More forward-thinking banks will leverage this as a cornerstone for a comprehensive overhaul. Forbes analysis suggests that banks stand to benefit more than any other industry from Gen AI, potentially boosting productivity by 22-30%. However, the primary impact of Gen AI is expected to target banking sector revenues. Projections indicate that integrating AI with sales, marketing, and customer service functions could elevate revenues by 6% over the next three years.

Banks are poised to harness their vast troves of customer data in conjunction with AI, surpassing conventional demographic segmentation to treat each customer as a unique entity. The ultimate objective is to deliver digitally the same authentic and personalized experience traditionally associated with in-branch interactions. Through AI-driven consultation, banks can craft tailored offers and recommendations based on individual customer data and preferences. This personalized approach can drive sales and foster stronger customer loyalty. Ultimately, the aim is to forge a seamless fusion between digital channels and human interaction. By implementing AI-powered solutions, banks can gain deeper insights into their customers and deliver personalized experiences akin to traditional branch consultations.

What our Experts have to say

"The financial industry faces the exciting question of how much it wants or needs to leverage new technologies for customer care and acquisition. AI-driven advice and generative AI are on the rise, leading to significant efficiency gains as well as new customer experiences and thus competitive advantages. New providers are revolutionizing the traditional banking and insurance market. However, those who do not invest in the necessary network infrastructure and wireless solutions in a timely manner will fall behind. An annual review of network coverage and data security is not only recommended but essential. Network specialists can conduct ongoing assessments tailored to the needs of banks and insurance companies and propose and design improvements and optimizations. When technology is used correctly, it can be a real advantage, especially in the current times. I recommend taking advantage of it."

Martin Niemann, Sales Director Zurich and Member of the Executive Board at BNC.

 

 

Trend 3

Open Banking

Open Banking is on the verge of further expansion, fostering collaboration and healthy competition among financial institutions. The increased utilization of APIs and the evolution toward Open Finance, which encompasses various financial services, are inevitable.

By unlocking bank data and providing banking interfaces (APIs), Open Banking enables customers to access a broader range of financial services and enhances interoperability among different banks and financial institutions.

This trend is driving increased adoption of APIs as financial institutions recognize the value of collaboration and strive to deliver better services to their customers. Moreover, Open Finance presents new opportunities for integrating diverse financial services such as investments, insurance, payments, and more.

What our Experts have to say

"Although Open Banking offers many benefits, there are also risks and challenges that must be considered. These include data privacy and security, as Open Banking provides the opportunity for third parties to access sensitive banking data. Clear guidelines must be in place to prevent the risks of data breaches and security issues. Furthermore, third parties may misuse the data and use it for other purposes or disclose it to others.

This would lead to a significant loss of trust, which could result in a marked decline in Open Banking services.

For banking regulators in respective countries, this also poses regulatory efforts, as different regulations exist in different countries.

A major dependency of the interfaces (APIs) is availability. This means that access must be well planned and built to be resilient to avoid disruptions in banking services.

These risks highlight that Open Banking must be carefully planned, implemented, and regulated to maximize the benefits and minimize the risks. Close collaboration between banks, regulatory authorities, fintechs, and consumers is essential to fully leverage the potential of Open Banking while ensuring security and data privacy."

Achim Büttner, Solutions Architect Secure Data Access at BNC

 

 

Trend 4

Big Data and Analytics

Big Data Analytics isn't just a theoretical concept; it's already a practical tool causing a stir in the banking sector.

CUSTOMER PROFILING

Big Data plays a pivotal role in customer profiling within banks. By analyzing a customer's banking history along with personal and transactional data, banks can offer personalized plans and financial solutions. This not only enhances the customer experience but also boosts customer loyalty. Additionally, leveraging demographic data allows banks to target specific products to customers more effectively.

FRAUD DETECTION

Big Data and statistical analyses empower banks to detect potential fraud proactively. Specialized algorithms track and analyze spending and behavioral patterns, enabling banks to identify individuals who may pose a fraud risk. Retail banks, investment banks, and other financial organizations often have dedicated risk management departments that focus on fraud prevention and heavily rely on Big Data and Business Intelligence (BI) analysis.

CREDIT DECISIONS

Traditionally, credit decisions rely on creditworthiness ratings, which may provide an incomplete picture of a bank's customers' financial health. Big Data offers a more comprehensive overview by considering factors beyond creditworthiness assessments, such as spending habits and the nature of transactions. This enables banks to make more informed and nuanced credit decisions.

COMPLIANCE

Big Data Analytics and BI tools significantly streamline the compliance process. These tools manage and monitor tax compliance and documentation with central banks. Compared to outdated systems that are labor-intensive and time-consuming, modern data architectures and BI tools simplify compliance by consolidating information into an easily accessible format, thereby reducing the risk of errors and fraud.

CYBERSECURITY

Banks leverage Big Data Analytics and Artificial Intelligence (AI) to bolster their cybersecurity measures against increasing cyber threats, including internal risks. These tools track customer behavior and internal activities, identifying potential security risks. Moreover, banks collaborate with government agencies, sharing insights from their BI and Big Data Analytics tools to mitigate risks associated with financial terrorism.

What our Experts have to say

"The IT infrastructure of banks or insurance companies must be designed to be scalable, secure, and compatible in order to make the best use of big data and analytics platforms. The challenge lies in creating an environment that can efficiently process large volumes of data, fend off cyber threats, and ensure secure and compliant data management.

Ensuring stringent cybersecurity and continuously adapting to changing regulatory requirements to meet both business demands and customer needs is essential."

Achim Büttner, Solutions Architect Secure Data Access at BNC

 

Banking

 

Conclusion

The trends mentioned above, including IoT, AI-driven advisory, Open Banking, and Big Data Analytics, underscore the immense potential of technology in the banking and financial services sector. The integration of IoT devices enhances security, efficiency, and customer experience within banks and payment systems. AI facilitates personalized and tailored financial services, as well as more effective risk assessment and fraud detection. Open Banking encourages collaboration among various banks and financial institutions, extending customers' access to financial services. Big Data Analytics enables more precise customer profiling, informed credit decisions, and improved regulatory compliance.

To capitalize on these trends, financial institutions must be willing to invest in corresponding technologies and adapt their business models to rapidly evolving customer demands. Successful implementation also necessitates a focus on data privacy and cybersecurity to uphold customer trust.

Furthermore, the aforementioned trends in the banking and financial sector directly impact the Wi-Fi infrastructure of companies. Businesses must ensure their Wi-Fi networks meet escalating demands for capacity, reliability, and security. The integration of IoT devices, AI-driven advisory, and other technologies increases the number of connected devices and data traffic within networks. Consequently, companies need to invest in robust Wi-Fi infrastructure to accommodate heightened demands.

In addition to performance, Wi-Fi infrastructure must provide reliable and secure connectivity. Implementation of adequate security protocols and encryption systems is imperative to safeguard sensitive data generated by IoT devices and other technologies. Wi-Fi infrastructure should also be scalable and flexible to adapt to changing demands, seamlessly integrating new devices and applications and providing additional capacity as required. Moreover, Wi-Fi infrastructure plays a pivotal role in data management and analysis, with the ability to capture, process, and analyze data in real-time contingent upon reliable Wi-Fi connectivity and robust data management systems.

In summary, a reliable, high-performance, and secure Wi-Fi infrastructure is indispensable for companies to fully leverage the benefits of technology trends in the banking and financial sector. Therefore, companies should invest in suitable infrastructure to ensure smooth communication, data transmission, data management, and analysis.

 

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