Banks have come a long way since the days of our grandparents when pensions were delivered to their doorstep with a glass of brandy, some snacks, and a tip for the postman. Back then, expectations revolved around modernizing services, yet even the brightest minds could not have predicted the level of evolution we witness today. Digitalization has introduced profound changes, with emerging technologies reshaping how clients and banks interact—and this journey is far from over. We are at the heart of a global evolutionary storm, witnessing one of the most accelerated periods in human history.
In this article, we focus on how the Internet of Things (IoT) has the potential to fully redefine how users interact with banks.
The Internet of Things in Banking – What It Is and How It Works
While we’ve previously touched on some aspects of IoT, it’s worth revisiting this revolutionary technological concept that is reshaping the world. IoT connects devices, sensors, and systems across a global network. By linking physical objects through the internet, IoT enables them to collect, share, and analyze data in real-time, with minimal or no human intervention.
If we set aside the industrial use cases and recall our childhood wish to turn on household appliances remotely or without leaving bed, we get a basic understanding of IoT. Its core power lies in turning ordinary devices into smart devices, enabling them to communicate with each other. As IoT continues to develop, its applications are expanding rapidly into various industries—from manufacturing to healthcare, from smart cities to the focus of today’s discussion: banking.
Banks of the Future
Automated Teller Machines (ATMs) were introduced in the 1960s and marked a significant turning point in the automation of banking services. In many ways, ATMs were the forerunners of IoT systems. While they may not technically qualify as IoT devices due to their limited data collection capabilities, ATMs laid the groundwork for banking automation. They enable transactions without human interaction, which is at the heart of IoT functionality.
Today’s ATMs go far beyond cash withdrawals and balance inquiries. In many places, users can pay bills, top-up mobile credits, and transfer funds.
We’ve also seen digitalization enhance security within the banking sector. Technologies are now focused on protecting both the physical and digital banking environment.
Some notable examples include biometric security systems such as fingerprint scanning, facial recognition, and retina scanning for authentication. AI-powered surveillance systems capable of detecting suspicious behavior and potential security threats also showcase the fusion of human ingenuity and cutting-edge technology.
In terms of cybersecurity, advanced firewalls and intrusion detection and prevention systems are key elements of modern protection frameworks.
The risk of fraud has been significantly reduced thanks to machine learning and analytics-based fraud detection systems that identify and block fraudulent transactions.
A major innovation where IoT plays a key role is the concept of smart branches. Personalization is the cornerstone of these branches. Banks now leverage customer data to offer tailored services and recommendations.
Additionally, smart branches use IoT to optimize and manage their physical environment. For example, lighting and temperature sensors automatically adjust to create a pleasant atmosphere, while crowd-monitoring sensors help optimize staff allocation and reduce wait times. This fusion of technology, automation, and personalization is shaping the future of banking, delivering services tailored to customer needs in real-time.
The Future of Customer Experience: What Lies Ahead?
Human imagination knows no limits, and we’re already witnessing advancements that go beyond today’s trends. The integration of artificial intelligence and machine learning with IoT promises even more transformative changes.
The relationship between banks and customers has already evolved significantly, and here are some trends shaping the next chapter.
Biometric authentication is embedding fingerprint sensors and similar technology directly into credit and debit cards, enabling secure, user-specific transactions. This means only the registered cardholder can use the card, requiring biometric verification at the point of sale and eliminating the need for PINs or signatures. While the technology is progressing, challenges such as production costs, system upgrades, and privacy concerns remain. Financial institutions are actively exploring this technology to enhance both security and user experience, with companies like MasterCard and Visa already testing its transformative potential.
In the mobile banking space, biometric and encryption technologies (e.g., Google Wallet and smartphone-based transactions) are already outperforming traditional cards. Who knows—perhaps the next step will be making payments via fingerprint or even an eye scan? It’s not out of reach.
Video-enabled ATMs blend the convenience of traditional ATMs with personal interaction. Equipped with video technology, these machines allow clients to perform transactions while interacting with AI systems designed to mimic human conversation. This hybrid model expands available services, enables multi-language support, and facilitates complex transactions traditionally reserved for in-branch visits, such as check cashing or loan applications. This technology extends service hours, reduces wait times, and improves overall customer satisfaction.
Blockchain and IoT
The integration of IoT and blockchain enhances transaction security by combining decentralized data storage with real-time data collection via IoT devices. This powerful synergy safeguards data integrity, reduces fraud risk through decentralization, and enables automated transactions via smart contracts, all while protecting privacy through advanced encryption.
This approach is gaining traction in sectors beyond finance, including supply chains and healthcare. Several banks and financial institutions are already experimenting with blockchain-IoT integrations to boost both security and service efficiency.
For instance, JP Morgan launched its blockchain-based Interbank Information Network (IIN) to allow member banks to exchange payment approval information efficiently. HSBC has used blockchain technology to streamline trade finance transactions, cutting down on paperwork and processing time. Bank of America has filed numerous blockchain-related patents, signaling its active exploration of this technology’s potential.
Final Thoughts
The possibilities are endless, and many are already in use. Banking has evolved into something we could have hardly imagined just a few decades ago—and the transformation continues.
If your organization is seeking expert support to analyze and optimize internal processes, you’re in the right place. Contact us today and let us help you future-proof your business operations.
