“The Internet of Things” (IoT) is the name given to the growing phenomenon of interconnectedness between regular household devices, brought on by advances in computing technology and the evolution of the Internet. As more and more devices start talking to each other and, in turn, talking to us, our communication patterns in everyday life will change. By extension, this trend could have a profound impact on how clients interact with financial services institutions to receive advice and make investments. So, progressive organizations and their financial advisors need to consider how best to align their own business and information technology strategies with this trend.
In general, the IoT is defined as a network of physical objects embedded with electronics, software, sensors and connectivity that enable these objects to exchange data with the manufacturer, operator and/or other connected devices. Although the trend is receiving more and more attention from the media these days, it is not new. The Xerox Corp. photocopiers that I started selling in the late 1980s, soon started placing their own service calls and re-ordering their own toner. In 1990, Sunbeam Products Inc. first developed a toaster that could be turned on from another city, with the darkness of toast controlled remotely. In fact, the term “Internet of Things” was first coined in 1999.
Appliances are now “thinking” and looking after themselves, notifying owners of their status and even adjusting their settings to accommodate their owners’ preferences. This is expected to grow. Current technology allows 250-300 connected devices in the average home and there are 16 billion devices connected to the Internet today, with the figure expected to double by 2020. Home automation companies such as Nest Labs (founded in 2010 and bought by Google Inc. for US$3.2 billion just four years later) are regulating our thermostats and adjusting other home appliance settings to suit our living patterns. Our cars are self-assessing, talking to their manufacturers as well as our insurance companies.
Smartwatches garnered greater attention with the debut of the Apple Watch earlier this year. Although time will tell how successful this innovative new technology will be, some feel it could transform the way we interact with each other, our financial services institutions and employers. Because a smartwatch sits on your skin and can gauge your mood and many vital signs, some have also suggested it could one day replace the smartphone as the ubiquitous communication device — eliminating credit cards and allowing insurance companies to monitor the owner’s health, permitting employers to encourage healthy behaviour by offering incentives or vacation days to employees.
Could smartwatches also become a communication channel for advisors and their clients? A reassuring advisor communication or video conference via a smartwatch during volatile markets could go a long way in supporting clients’ needs and avoiding hasty decisions concerning their financial well-being. Once connected to their investment portfolio information and calendar, quarterly updates with your client could be scheduled and conducted anytime and anyplace.
Apparently, the refrigerator is a much sought-after appliance for marketers these days as it is the only always-on device in the home that all members of the family interact with throughout the day. The modern refrigerator can monitor its contents, order supplies and notify the owner of expiry dates on perishable items. Soon, stores will be marketing to the fridge and other devices, offering coupons and other incentives to encourage commerce. Refrigerators can compare prices and complete transactions based on my preferences.
Whereas the television set was the focal point in the home where most of the family gathered 10 years ago, the family is now spread out as the kids are in their bedrooms watching TV shows on their laptops, tablets and smartphones, while the parents are still sitting in the family room. As a result, the fridge could become the main hub in the household as everyone in a home still migrates to this appliance on a daily basis.
So, if manufacturers of consumer goods are trying to impress my refrigerator and other appliances, is it not conceivable that financial services institutions will soon follow suit? Could you imagine financial advice being disseminated from the fridge, investment products ordered and replenished, RRSPs topped up, and financial consultations scheduled? Could financial services institutions improve their customer service with this level of connectedness?
Technology is helping transform the way we interact with financial services institutions and the IoT acting as a quiet gatherer of information, could disrupt things further. Mint.com is an account aggregator that offers this value proposition. The service knows what’s going on with your money, so it can help you find savings.
Furthermore, much has been made of the recent entry of “robo-advisors” to the wealth-management landscape. These hybrid offerings are combining technology with personal financial advice to provide more cost-effective, tailored solutions to the masses. Robo-advisory services may not appeal to all investors, but many of them will find ways to use technology to manage their financial health and make their lives easier. All financial services companies should do the same. Is your organization accounting for the IoT and how best to incorporate relevant tools into your customer service model?