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How the IoT Will Deliver More Power to Finance

The internet of things (IoT) looks set to augment the capabilities of almost all finance professionals, even if it may initially have sounded like hype.

Posted: 19th December 2022 by Katina Hristova
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As a set of technologies based on edge computing infrastructure and 5G or high-speed connectivity, it is rapidly becoming a reality with many real-world implementations. Statista estimates global IoT spending will hit 1.1 trillion dollars this year, predicting the number of IoT devices worldwide will shoot up from 13 billion currently, to more than 29 billion in 2030.  

Since it is based on “things”, its direct impact on the day-to-day work of senior management or finance departments may seem remote. But IoT can sustain AI (Artificial Intelligence) and machine learning (ML) applications handling multitudes of data flowing from many types of sensors and devices, even when mobile. It opens up huge opportunities for everyone, whether supplying or using services.

For senior finance professionals, IoT provides dramatic new access to real-time data insights from every area of an enterprise. It delivers a level of transparency, immediacy and confidence unobtainable by any other means. This will transform asset utilisation and inventory management, no matter how large or dispersed the organisation is. Edge computing infrastructure ensures the old geographical barriers to the processing of data in remote locations no longer apply, democratising the use of advanced AI and ML tools.

On a more mundane level, finance departments will find record-keeping and reporting to become far more automated and efficient. Able to monitor and analyse data from sensors in almost every nook and cranny of the business, treasurers will, gain a much firmer grip on cost and performance, able to access a huge wealth of data at any level of detail.

With access to analytics solutions made possible by edge computing, organisations can react far more swiftly to events and opportunities. They can employ predictive and prescriptive analytics to extract critical insights from detailed information about inventory, specific financial flows, facilities, business units or assets.

Wider applications across insurance

In insurance and commercial banking, the ability of edge platforms to process and transmit data from 5G-enabled devices are likely to have a significant positive impact on the quality and speed of policy and credit approvals, providing accurate, verifiable data on everything from vehicle usage to agricultural, factory or mining outputs.

Telemetry is already well-established in the vehicle insurance sector and is certain to expand. With access to IoT data streams and the infrastructure to subject all this real-time information to advanced analytics, insurers will be able to offer policies that are far more closely tailored and much more flexible. This will extend to everything from consumer and health insurance to the underwriting of major extractive industry projects.

IoT in trade finance

In trade finance, data from sensors in ports, ships, and from containers and vehicles gives banks and insurers a new level of end-to-end transparency about the transactions, carriers and cargoes they are asked to fund and underwrite.

This will reduce costly delays and fraud whilst increasing insight into the efficiency of individual operators. All organisations engaged in trade will improve access to working capital. And the use of IoT technology increases the likelihood of small and medium-sized businesses obtaining trade finance and credit, based on rapid analysis of typical industry risk indicators.

Fund management, the markets and IoT

The direct use cases of the IoT are harder to foresee in fund management, investment banking and capital markets and are often confused with analytics and AI. There is, however, no doubt that companies operating in these intensely competitive arenas will have to accommodate themselves to the new volumes of data the IoT will generate from different industrial and commercial sectors. If they fail to build the capacity to analyse aggregated and refined IoT data, they will lose out significantly to financial institutions that have the infrastructure and the solutions in place.

Professional services 

For the professional services sector, access to streaming data and its analytics will enable firms to offer services and outsourcing on a near-real-time basis, eliminating unnecessary hours and increasing efficiency. In accountancy and financial management, the nature of auditing and consultancy is likely to change in industries such as discrete manufacturing, where sensor data will transform how organisations operate. Auditing in many sectors may well become a more continuous process, adapting to the constant flow of data.

The necessary IoT infrastructure – edge computing

IoT growth depends, however, on the expansion of edge infrastructure because it requires a platform with compute, low latency network connectivity and public cloud access. Without this, most use cases will struggle to get off the ground. In the UK, thankfully, the country’s edge infrastructure is advancing fast, bringing IoT technologies and services within reach of almost every business in the country.

Edge computing is vital because the IoT requires gateway hubs to process masses of data from sensors and devices. Because public cloud-based applications that orchestrate the IoT do not require all the data devices generate, IoT gateways are best-suited to edge data centres where they can filter out what is unnecessary and then pass on the critical information.

There are already live use cases in the transport and energy sectors, but large-scale adoption will follow once edge infrastructure platforms have fully developed their low latency connectivity, high-speed backhaul to the public cloud and local computing capabilities.

Applications focused on real-time and aggregated data analytics need connectivity that has either low jitter, loss and lag or has dedicated high bandwidth. Telecommunications companies have been the first movers in this market with 5G, but carrier fibre delivers more dependable waves.

As the IoT develops it will spread across a wide range of business applications that require different kinds of connectivity. This is where Secure Access Service Edge (SASE) networks will deliver major change. SASE gives visibility over applications and enables organisations to securely control traffic intelligently based on continuous assessment of compliance to a policy. Unlike traditional WAN architectures which lack the visibility and control required for distributed IT environments, SASE offers flexibility and the opportunity for ensuring secure access at the time it is needed, which standard MPLS connectivity cannot match. MPLS will have its place but is unlikely to remain a central technology.

Enterprise architectures must accommodate the IoT

There are also remaining challenges to overcome in integrating the multiplicity of IoT devices and workloads into an enterprise’s current architecture. The shortage of staff with the requisite skills is also a barrier for many organisations. This is most easily overcome by collaborating with partners that understand fully the developing relationship between edge platforms and IoT implementations.

For any decision-maker in finance or within a corporate treasury, the evolution of IoT technologies operating on edge infrastructure is a development they must think hard about. Many of their work practices are set to change because of it. And their ability to make effective decisions that propel their organisation to greater efficiency and profitability may depend on how well they adapt to the IoT. They need to consider how their organisation should approach what will be a major advance in capability. With the right infrastructure in place and the right partnerships, all finance professionals stand to gain more control from the Internet of Things, enabling them to transform their organisations.

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