Internet of Things
By: Sagar Sharma

Banks can Bank on IoT for Higher Efficiency

India employs around 35,000 men and 8,800 vehicles to maintain its more than 200, 000 ATMs. Despite its scale, the numbers don’t make headlines in normal circumstances. However, the recent demonetization drive did divert people’s attention towards these ATMs. Caught off-guard by the surprise decision, banks went in a state of mass delirium re-calibrating these 200,000 ATMs to fit the newly printed notes.

While these ATMs are a crucial part of India’s march towards financial inclusion, operating them has always been a huge task. The costs aren’t easy to ignore either if you start adding up costs involved in transportation and loading of cash, ATM’s annual maintenance and management, electricity bills, security (guard’s salary, security cams), space rent, interest for maintaining idle funds, and depreciation. A 2014 estimate (assuming an average ATM running cost at Rs 50,000/month) pegs India’s total annual expenditure on ATMs at around Rs 10,000 crore.

Banks have limited means to cut these costs and that’s why the burden is often shifted to the customers in terms of transaction charges. Further, these costs are unlikely to go down for banks if India if it has to match its global counterparts in terms of financial inclusion.

Banks can significantly reduce their AC operations cost with IoT

IoT can bring in significant cost savings in management and operations of ATMs. It is often seen that ACs are either not working or are cooling too much. These malfunctioning ACs can be detected via temperature sensors installed at each ATM premises. Further, malfunctioning doors can also be detected by sensors. By connecting these sensors to a central cloud-based reporting and management dashboard, banks can take preventive actions in time, eventually saving a lot on energy and maintenance costs.

Described above is just one of the many simple ways in which IoT can benefit banking organizations.

Other major use cases of IoT for Banks

Prevention of frauds

IoT can help in identifying debit/credit card transaction related frauds. Whenever a customer swipes a card, by matching the account holder’s mobile/device location with the transaction location, a bank can approve or decline the transaction with increased precision without any need for telephonic verification (which is the present method).

Reduction in NPAs

A significant earning for banks comes from lending to businesses. At the same time, they also constitute a major part of banks’ NPAs. By interpreting the data from sensor devices installed at borrower’s warehouse, banks can keep track of raw material and inventory stocks. This integration will help banks in ensuring that the loan amounts are paid when the inventory is sold. As modern warehouses increase IoT adoption, banks can leverage the same to reduce overhead costs in tracking and thus reduce their NPAs.

Agriculture lending

IoT is already modernizing agricultural landscape. However, banks can also receive advanced estimates for farm crops output based on real-time weather data and projections. Data analytics tools can help interpret this data into actionable intelligence for banks. This can improve advance planning for banks.

Capturing the factors affecting IoT adoption by Banks in India

  • Support for efficient operations
  • Support for automation
  • Better insights for marketing, cash flows and overdrafts
  • Support for financial inclusion goals
  • Lack of agility in decision making
  • Unclear roadmap for technology adoption
  • Lacking readiness for newer technology
  • Increasing IoT adoption elsewhere
  • Higher consumer awareness & demand for swift and personalized services
  • The government’s push towards cashless transactions
  • Reduced costs for sensors and  technology enabling M2M connectivity
  • Evolving security threats
  • Market disruption by IoT startups

Despite its potential advantages, banks have so far shown little interest in developing IoT capabilities. The reputational and financial costs associated with threats in IoT are probably overweighing the opportunity costs at the moment. However, advanced platforms as those offered by IBM Watson and Xively are helping organizations across varied sectors expedite their IoT initiatives and banks can also take their advantage in building advanced IoT solutions for better efficiency.

Credencys Solutions Inc is a leading software development services and solutions provider which has helped numerous businesses in building strategies for their business growth. Subscribe to our blogs for getting similar articles on management, strategy, leadership and more.


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