The Internet of Things


Future Tech

By Michael Blankenheim

In the “Terminator” movies, networked computers become sufficiently intelligent to manufacture killer cyborgs with the mission to annihilate humankind. ICBA Independent Banker is happy to report that robots aren’t marauding down Main Street. But thanks to the proliferation of computer chips embedded in nearly every manufactured device, more wondrously liberating than threatening possibilities are on the horizon through a concept called the Internet of Things.

The Internet of Things, also known as the Industrial Internet, is where networked smart devices communicate to powerfully automate a multitude of complex tasks for both consumers and businesses, potentially including community banks. The technology research think tank Gartner Inc. in Stamford, Conn., estimates there will be 26 billion physical devices connected together by 2020, a nearly thirtyfold increase from 900 million in 2009. And Gartner states that doesn’t include smartphones, tablets and PCs.

As for the potential of the Internet of Things, think of an industrial piece of machinery sending a message to a computer to schedule needed maintenance or repair. Think about how a moisture sensor embedded in the ground and connected to a weather forecast could instruct a sprinkler system that a crop needs to be watered. Or consider how jewelry, such as a gold necklace, might monitor a person’s vital signs in real-time and transmit that health data to an app on your smartphone, or to a local doctor’s office or hospital in case of unusual indicators.

The potential banking uses of the Internet of Things could be just as amazing, says David O’Connell, a senior analyst on the wholesale banking team at the research company the Aite Group. O’Connell wonkily defines the tech concept as how “data flows off of machines to their owners and operators and also third parties.” But the main point for future innovation, he says, is how that data flow might provide information about a community bank’s real time funding, revenues, profits, risks and opportunities in all sorts of new ways.

For example, the Internet of Things could inform community banks how their customers, employees and systems are performing, including where they are and what they might be doing. It will enable rapid-fire sharing of information between banks and other systems and entities to create safer and more highly productive operations, potentially monitoring everything from thwarting cybercriminals to anticipating the momentary credit or transaction needs of consumers to automating unproductive regulatory red tape.

Take the example of labor-intensive loan collateral tracking, says O’Connell. The Internet of Things could soon provide community banks with up-to-the-moment assessments of the value of a particular loan portfolio or the value of collateral backing the portfolio. Now imagine connected systems and devices validating the value and location of assets backed by your community bank’s loans. Think about sensors tracking the location of vehicles in the inventory of a borrower’s auto dealership, or about computers validating whether a 10,000-gallon tank of fuel at a borrower’s fuel company is full or empty. Both scenarios would communicate possible financial needs of the bank and its customers.

“If you’re not comfortable lending against devices or machines, you might be if you can confirm they are continually in use and generating revenue,” O’Connell says.

Perhaps nowhere more could the Internet of Things transform banking more than in systems and data security. Significant strides are being made to more effectively prevent and stop financial fraud and cyberattacks through rapid and widely-shared transaction pattern analysis. So imagine how interconnected smart systems might securely and confidentially communicate in seconds throughout the financial world when an account’s credentials have been compromised or stolen. Such a defense could render these types of data thefts almost immediately worthless to perpetrators.

So instead of an invasion of killer robots, many tech experts believe the Internet of Things may be the cusp of a new era allowing consumers and businesses, including community banks, to harness data from physical devices to be more productive by eliminating mundane tasks of everyday life.

Michael Blankenheim is a freelance writer in Maryland.