In the article “Data isn’t just the new oil, it’s the new money. Ask Zoë Keating”, author Derrick Harris, relayed cellist Zoë Keating’s suggestion to the music industry: “The law only demands I be paid in money, which at this point in my career is not as valuable as information. I’d rather be paid in data.”
For Keating, the ability to engage with her fans, her audience, directly can be as important, if not more important, than receiving monetary compensation for her work. And she is not alone in this view. The financial services industry has started to accept the premise that the only way they will emerge unscathed by the onslaught of digital disruption is by harnessing the power of data.
The use of technology to disrupt traditional financial services, and in the process introduce new players in the market, has caused incumbent financial institutions to investigate emerging technologies like advanced analytics, big data, artificial intelligence, machine learning, and more recently, the Internet of Things or IoT.
Some of the early use cases are in wearables, payments, blockchain-based smart contracts, using beacons to create smart banking experiences, home banking, and chatbots.
But as Chris Lim, partner, advisory – risk & regulatory at EY, caution in the rush to identify and mine innovative ways of using IoT in banking and insurance, vendors are responding with solutions that are not built with an appreciation for how regulations have evolved to safeguard both customers and the financial institutions that serve them.
To date, IoT is being used in product planning and management, to help in creating tailored marketing for the customer of one, is being used to deliver so-called proactive service, and the growing popularity of wearables is making its way into retail banking and insurance.
Lack of standards: the number one problem of IoT
As with all emerging technologies and free market society, everyone hopes that their approach becomes the standard.
IDC predicts that by 2020 50% of IT networks will transition from having excess capacity for handling the additional IoT devices, to being network constrained with nearly 10% of sites being overwhelmed. Within a year, 40% of IoT-created data will be stored, processed, analyzed, and acted upon close to, or at the edge of the network, predicts the analyst.
But to get to this future, the world will need to come to the understanding that standards must be applied to reduce risk while providing viable economic returns to everyone.
In a press release, M2M Alliance chairman, Dr. Andreas Fink said: “Uniform standards and appropriate certificates would eliminate the greatest weak points from the outset. “If we want to ensure that insufficiently protected hardware cannot become a mass phenomenon, the industrial, research and political sectors need to sit down and work together on solutions.”
Security: the other number one problem of IoT
In a similar vein, financial institutions are wrestling with defining use cases for IoT. The Smart Payment Association (SPA) paper, IoT Payments: addressing the protection problem, raises several concerns about the security of mobile payments. It refers to a Symantec claim that “the number of malicious attacks on IoT-enabled devices grew some 600% between 2016/17.”
IoT is certainly a large and growing target, and with personal data ‘gold’ on offer for successful hackers, there’s every reason to assume attacks will continue to grow in volume, ferocity, and sophistication.
But just because risks abound shouldn’t stop the industry, and the rest of the ecosystem, from stopping to develop and evolve the technology. The SPA points out that where payment is concerned the opportunities are many. The SPA believes that the industry should push ahead, but to “do so with caution and a better understanding of how to protect these internet-connected devices to minimize the risk of attack and fraud.”
What to do now
In the short term, such security standards and mandatory certificates may cause growth in the IoT sector to be somewhat slower than predicted by Gartner and other studies at the moment. However, in the long term, secure solutions should contribute to its popularity and thereby encourage further growth.
Lim offers this advice: “Focus back on the fundamentals and then in the back of that overlay what exactly you use cases and then you're probably in good hands.”