The popularity of fintech is on the rise around the world. For that matter, so is the popularity of the “Internet of Things,” a term that refers to products and devices that transmit data and allow users to perform functions via the internet.
Thus, it’s worthwhile to consider how these two booming industries may overlap in the near future. The following are just some predictions experts have made:
Insurtech is the sub-category of fintech related to personal and commercial insurance. Thanks to the Internet of Things, safe drivers may one day be able to lower their rates via a combination of insurtech products and devices installed within their vehicles.
For example, someday a driver may hold an insurance policy that he or she purchases and/or manages via an insurtech application. The cost of that policy could rise or fall depending on driving habits. Those confident in their ability to drive safely may choose to install devices in their cars that transmits data back to the insurtech application, essentially letting the program know that they’re practicing good driving habits. Such a technology would offer an efficient means of sharing this information with an insurance provider.
This same principle could apply to home insurance. Providers want customers to lock their doors and turn off appliances when they leave home, and generally take steps to keep their homes safe from intrusion or damage. As homeowners install more smart devices within their houses, they may be able to let their providers know – via a direct connection to such devices – that they’re the type of customer who deserves a less expensive rate.
It’s not difficult to imagine health insurance providers taking a similar approach. Many health insurance companies already try to incentivize healthy habits in their customers. Via a smartphone, smartwatch, or fitness tracker, customers could supply their providers with data about their exercise routines, and perhaps even their diets and physical vitals.
Wearables & Payments
Wearable technologies, like smartwatches, are very likely to offer unique opportunities to fintech startups. This is particularly the case when it comes to making payments for basic services.
Imagine a developer partnering with the municipal transportation agency of a major city such as New York. Together, they could develop an app that allows frequent commuters to purchase “digital” subway passes, storing them virtually in the cloud. In theory, passengers could activate the application on a smartwatch and board the train without swiping a MetroCard. Instead, a sensor would recognize the application and deduct the fare from their subway pass accounts.
Any destination or service that requires users to make a transaction before it can be accessed could potentially implement this type of program. Amusement parks, museums, even hotels – all could blend fintech with the Internet of Things to offer customers greater efficiency and convenience.
The more information banks have about consumer habits, the easier it is for them to offer personalized service. As the Internet of Things becomes ubiquitous, banks will have the capability to develop more detailed and accurate customer profiles.
The implications of this are wide-ranging. A bank that has a clear and accurate profile of a customer may be able to determine whether or not he or she is a good candidate for a loan. Credit card companies will be more attuned to their customers’ spending habits, offering features tailored to their lifestyles.
Banks will also simply connect with users through their mobile devices to optimize customer service. While many banks already offer some degree of customer service accessible via mobile apps, in the future, customers may be able to make calls through their smartphones, make deposits by inserting checks into digital readers in their own homes, or even scan items at retail stores to immediately see what their account balance would be if they were to purchase said items.
This concept may also translate to investing. There may come a day when a user can take a picture of a company logo with a smartphone and gather information about its stock, deciding right there whether to make a purchase or not.
These examples, as always, are just the tip of the iceberg. The possibilities for combining the Internet of Things with fintech services will evolve as these two industries continue to innovate. That said, one thing is certain: in the near future, the Internet of Things is going to play an increasingly important role in fintech.