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Consumer Trends

​The internet of things (IoT) is expected to mushroom to some 30 billion devices connected to the internet by 2020. IoT enables more pay-as-you-go business models, prompting new buying patterns and forcing banks to meet their customers in new digital locations.

Parking your car across the Nordics and select European cities is no longer the hassle it used to be. The first time you pay at a 2Park parking lot, you enter your license plate information. At subsequent visits to any of their facilities, your license plate will then be scanned automatically and linked to your payment information. All you need to do is drive away.


5G is expected to make the Internet of Things (IoT) mushroom, with an estimated 30 billion devices, such as smartphones, wearables, and home appliances, to be connected to the internet by 2020. The devices will exchange 1,000 times more data in real time than on 4G, working at a standard speed of 20 gigabits per second. It will enhance video streaming, virtual reality and online games. The question is if it will it also affect banks' offerings towards consumers?


Voice-activated digital assistants push banks to find new playgrounds

30% of US households have adopted a digital assistant – an area in which IoT has the potential to rock banking somewhat:

"Smart speakers such as Google Home or Alexa make new demands on banking, as new touchpoints keep emerging where they have to be present. Keeping up could be a challenge for some, not unlike when mobile payments appeared," says Jesper Kildegaard, SVP, Creation Lab at Smart Payments.


The digital assistants allow consumers to handle their personal finances by voice while going about their daily chores. Consumers will be able to do the dishes, ask the digital assistant to add olive oil and thyme to the shopping list before they check the balance of their account, all by voice without having to get their hands out of the soapy water. Recently, the large Turkish bank Isbank announced its collaboration with Clinc and launched a conversational AI platform. The platform uses deep learning, AI and neural nets to converse in 80 languages to accommodate new ways of banking, and Kildegaard expects to see many more follow suit:


"Imagine you're adding things to your grocery list by voice while cooking the pasta Bolognese – wouldn't it be cool if you wouldn't have to print out the list, add items from your meal plan and then go to the supermarket, but instead could leave it all to the digital assistant? We're looking at the patterns – your generic weekly grocery shopping, things you add by voice, and ordering the right produce from various online stores  – making all the data come together to make it easier for the consumer," Kildegaard says.


Another example of IoT in e-com could be an espresso maker that registers every time a capsule is inserted and knows when it is time to order a new batch which it then does automatically. When the new supply arrives at the door, it has been paid for. One less thing to worry about.


Smart Payments develop services for Google Home's infrastructure, experimenting with various forms of payments and pin setting through voice recognition. When Kildegaard and his colleagues speak to banks, subjects such as digital assistants, Facebook Messenger and chatbots keep coming up:


"We've done a peer-2-peer voice bot that allows you to transfer, say, 100 kroner to your friend by saying it aloud. We're talking to banks about social banking; when you're 'hanging out' on Facebook anyway, watching the news and chatting with your friends, you may as well do your shopping there. Imagine you've spotted this bag you simply must have, then why not ask your bank on Facebook if you can afford it, either vocally or in writing. This is an area in which we see a lot of interest," says Jesper Kildegaard.


Processing at the edge requires less bandwidth

As processing at the edge becomes more widespread, Kildegaard is not convinced that 5G will play as pivotal a role in the proliferation of IoT as some will have it:


"Originally, the trend within IoT was for everything to be connected and processed in the cloud. Today, we tend to be more realistic and go for processing at the edge where you process data in the device. For really cool IoT, you'll combine a sensor that registers and an actuator that performs an action in response to it. It's more secure and stable if you don't have to go all the way into the cloud to perform an action, and back," explains Jesper Kildegaard.


An example of processing at the edge is the many camera systems performing face recognition, surveilling industrial production or filming traffic. More and more logic will be built into the camera itself which means it will transmit information rather than raw footage. If a camera is counting cars, for instance, it doesn't transmit a stream of cars but the actual number of cars, reducing the size of data to be transmitted. This makes the shift to 5G less important than initially expected, although processing at the edge was introduced for stability reasons rather than due to a lack of bandwidth, as Kildegaard points out.


In his opinion, IoT performs well on 4G already, although the extra bandwidth in theory could play a role within areas such as self-driving cars where the reaction time and stopping distance would be considerably lower on 5G than on 4G, although, for security reasons, manufacturers would hardly make an internet-reliant brake system.


IoT could change our buying patterns fundamentally

IoT could change consumption patterns as more and more pay-as-you-go options become available:


"A popular example is the pay-as-you-go car schemes available in most European cities now. You get in the car, and it will cost you while you're in the car. Once you've parked and left, you have no more obligations," Kildegaard says.


He predicts the payment industry could become challenged by IoT as more and more devices will be connected, prices will vary (depending on consent and access to data), and pay-per-use will become more widespread:


"It raises some questions of an ethical nature, but it also means that if IoT really mushrooms, it could fundamentally change our buying patterns in terms of amount, frequency and timing. It's hard to say how it will play out on a societal level, but logistically, it could become a challenge to keep your data up to date with every supplier whose services you use," he predicts, fearing the scenario when you have to change your card number with multiple suppliers, and keeping track of your consumption and expenses when you're no longer invoiced:


"For streaming, for instance, whether you pay per film, per minute, per second, you'll be invoiced differently, and how will you keep track of your expenses –  what system will handle this? Will you have to pay a card fee each time use your card online, even for tiny transactions?"


The bank as a safe for data

Already ten years ago, Chris Skinner,, talked about the fundamental requirement to move from the old banking structures to new ones. He noted how traditional banking structures, which date back to the Industrial Revolution, centre on the physical distribution of paper (cash and cheques) in a local network of buildings and humans. Obviously, this clashes with current needs for a digital distribution of data in a global network of software and servers, and it forces incumbents to deconstruct themselves, Skinner suggests unsentimentally.


His suggests the notion of banking as a service, which – together with Open Banking – injects customer-centricity into the banks' DNA. It challenges former margin models that could at times be non-transparent. Instead, new margin models would be based on expected fees in return for the safe management of (financial) data. Skinner thus envisages how banks could become the safekeeper of their customers' data, including self-sovereign identity.


Is it plausible that consumers, in good keeping with GDPR, would reclaim their data and put it in the bank, which would then serve as a secure data hub?


"This could well be. Identity would be one of them – also your biometric identity, although this is really separate from IoT. Banks could safekeep your finger vein pattern, your face; biometric signifiers that you would only store in an encrypted form with a trusted provider – a bit like the Danish e-identity solution NemID today. You trust it because the government puts it at your disposal," says Jesper Kildegaard.


He believes GDPR has prepared the ground for a data hub where consumers could store their own data. It could also help merchants comply with GDPR and only store the data necessary:


"Nowadays, people walk around with their wearables allowing their data to be picked up here, there and everywhere, which makes consent and the 'right to be forgotten' highly topical."


And the automatic parking lots in Norway where you pay with your license. Incidentally, 2Park's solution is based on Nets technology.


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​”If IoT really mushrooms, it could fundamentally change our buying patterns in terms of amount, frequency and timing. It’s hard to say how it will play out on a societal level, but logistically, it could become a challenge to keep your data up to date with every supplier whose services you use,” Jesper Kildegaard, SVP, Creation Lab at Smart Payments, predicts.