IoT in Banking and Financial Services Market Size, Share & Trends Analysis Report By Solution (Security, Customer Experience Management, Monitoring, Data Management, Others), By Services (Professional, Managed), By End-User (Banking, Insurance, Others) and By Region(North America, Europe, APAC, Middle East and Africa, LATAM) Forecasts, 2024-2032

Market Overview

The global IoT in banking and financial services market was valued at USD 1.53 billion in 2023. It is estimated to reach USD 36.65 billion by 2032, growing at a CAGR of 42.32% during the forecast period (2024–2032). There has been a paradigm shift toward digitization, which has led to a rise in the adoption of IoT in several industries, including the banking and financial industry. The adoption of IoT in banking and financial services is primarily driven by surging financial fraud, which increases the demand for efficient security systems. Implementing IoT in banking and financial services is also anticipated to enhance the operational efficiency in the field, thereby boosting market expansion. Moreover, the launch of novel IoT solutions to be integrated into banking and financial services is estimated to create opportunities for market expansion.

IoT is a short form of the Internet of Things. It refers to a network of real-world objects provided with software, sensors, and other technologies that allow them to exchange data and communicate over the Internet with other systems and devices. The concept behind IoT is to create a seamless network where devices can communicate, share information, and perform tasks autonomously, often without human intervention.

Numerous services and applications, such as smart homes, industrial automation, healthcare monitoring, environmental monitoring, and more, are made possible by this connectivity and data exchange. IoT can transform the banking and financial services sector by improving efficiency, enhancing security, and delivering personalized customer experiences. However, organizations must prioritize data privacy and security to ensure the integrity and trustworthiness of IoT-enabled systems and services.

Highlights

Asia-Pacific is the highest shareholder in the global market

Market Dynamics

Global IoT in Banking and Financial Services Market Drivers:

Increasing Demand for Security and Fraud Prevention

In recent years, there has been an alarming increase in banking and financial fraud. For instance, according to SEON's 'Global Banking Fraud Index 2023', the global neobank market increased by around USD 20 billion in 2022. SEON reports that approximately 36% of financial institutions encountered card fraud in 2022. This indicates a 26% growth compared to the previous year. US lenders say 75% of fraud losses are attributed to consumer phishing. Other financial services report those cases at a rate of 66%. Fraudsters are discovering new methods to bypass electronic security measures when engaging in online transactions.

Consequently, there is an increase in the adoption of IoT in the banking and financial services industry. IoT devices safeguard banking assets through improved identification verification. IoT devices can enhance identity verification for transactions through biometric authentication. Customers make payments through mobile applications employing biometric authentication methods such as fingerprints, retinal scans, and FaceIDs. IoT-enabled surveillance systems can also help detect and prevent fraudulent activities in branches and ATMs. Consequently, these factors drive the growth of the global market.

Operational Efficiency 

Operational efficiency in the banking and financial services sector, driven by IoT, entails optimizing various processes to enhance costs, enhance productivity, and improve service delivery. IoT devices, such as sensors and connected systems, enable real-time monitoring and management of critical assets like ATMs, servers, and branch facilities. For instance, IoT sensors can track ATM usage patterns, enabling predictive maintenance to minimize downtime and optimize cash replenishment schedules based on demand fluctuations.

Additionally, IoT-powered analytics provide insights into operational inefficiencies, allowing for targeted improvements in customer service, transaction processing, and fraud detection. Automation of routine tasks through IoT integration streamlines workflows, freeing up resources for higher-value activities. Moreover, IoT facilitates remote monitoring and management, reducing the need for physical interventions and enabling proactive problem resolution. Banks can optimize their operational efficiency, improve service quality, and achieve a competitive advantage in the quickly changing financial sector by utilizing IoT. This is anticipated to expedite the global market growth.

Global IoT in Banking and Financial Services Market Restraint:

Security Concerns 

Security concerns pose a significant restraint on the adoption of IoT in the banking and financial services market. With the proliferation of IoT devices, there's an increased risk of cyberattacks and data breaches, potentially compromising sensitive financial information. Threat actors may exploit vulnerabilities in IoT networks and devices to gain unauthorized access to customer data, financial transactions, and critical infrastructure.

Strong authentication protocols, efficient encryption, and ongoing monitoring are necessary for IoT device security to quickly identify and stop attacks. Moreover, the interconnected nature of IoT ecosystems introduces complex attack surfaces, making it challenging for banks and financial institutions to safeguard against evolving cyber threats effectively. Addressing these security concerns is paramount to building trust with customers and regulators and mitigating the risks associated with IoT adoption in the financial sector.

Global IoT in Banking and Financial Services Market Opportunities:

Launch of Novel Solutions

New IoT solutions can improve customer experiences by providing personalized services and real-time insights. For instance, IoT-enabled devices can gather customer behavior and preferences data, allowing banks to tailor their offerings accordingly. This enhanced customer experience can drive adoption as consumers seek convenience and customization. Therefore, the key players in the market are launching new IoT solutions in the banking and financial sectors.

For instance, in July 2023, Proxgy, an IoT start-up, introduced a payment soundbox called 'AudioCube' to allow merchants and retailers to get real-time transaction settlement notifications. The company has a verified order book of over USD 5 million, consisting of over 150,000 devices. The soundbox is accessible in 120 cities in India and accommodates 24 Indian languages. It features QR (quick response) capability with an LED display, a thermal printer, ad network integration, and dual screens. Such factors create opportunities for market growth.

Regional Analysis

Asia-Pacific Dominates the Global Market

Based on region, the global IoT in banking and financial services market is bifurcated into North America, Europe, Asia-Pacific, Latin America, and the Middle East and Africa. 

Asia-Pacific is the most significant global IoT in banking and financial services market shareholder and is expected to expand substantially during the forecast period. The Asia-Pacific region is experiencing swift adoption of IoT in banking and financial services due to technological progress, growing digital ecosystems, and evolving consumer preferences. There is an increase in fraudulent activities related to the banking and financial industry in the region. The number of frauds in the banking industry during the first half of 2024 has climbed significantly to 14,483 cases, involving an amount of Rs 2,642 crore in the first half of the financial year 2023-2024, compared to 5,396 cases (Rs 17,685 crore) in the same time a year ago, as per an RBI report. As a result, RBI (Reserve Bank of India) is making changes and bringing various guidelines to reduce fraudulent activities. For instance, in September 2022, the RBI issued guidelines on digital lending to regulate and promote the structured expansion of credit delivery through digital lending while addressing issues such as third-party engagement, misselling, data privacy breaches, unfair business practices, high-interest rates, and unethical debt recovery methods.

Furthermore, rapid advancements in IoT technology have led to the creation of innovative solutions for incorporation into the banking and financial sectors. For instance, in January 2024, an innovative Internet of Things (IoT) financial data management device created by fintech specialist Hari Prasad Josyula for the banking sector was patented for financial data management. The patent named "Internet of Things-Based Financial Data Managing Device in Bank" is a significant advancement in bank financial data collection, processing, and management. The unique devices provide a smooth and effective method for real-time monitoring and analysis of financial activities. It greatly improves security protocols and optimizes operating procedures to enhance efficiency and customer satisfaction. Therefore, these factors contribute to the expansion of the regional market.

Europe demonstrates significant development potential due to growing expenditures in digital transformation projects and increased demand for cutting-edge financial services. Deloitte's research indicates that Europe's investment in the Internet of Things (IoT) within the banking and financial services sector is expected to reach €5.2 billion by 2025. This growth is driven by efforts to enhance operational efficiency and client interaction.

Moreover, there has been an increase in banking and finance fraud. UK Finance published its Annual Crime Report, which outlines the sum of money reported by UK Finance members that criminals took through financial crime in 2022. The UK reported losses of almost £1.2 billion due to fraud, while the banking and finance sector stopped an additional £1.2 billion from reaching criminals. Out of the total £1.2 billion lost to fraud, £485.2 million was linked to authorized push payment (APP) fraud, with purchase and investment scams being the most common. In October 2023, the PSR study stated that APP fraud constituted 40% of UK fraud losses in 2022. These factors foster regional market growth.

Segmental Analysis

The global IoT in banking and financial services market is bifurcated into solutions, services, and end-users.

Based on the solution, the global IoT in the banking and financial services market is segmented into security, customer experience management, monitoring, data management, and others.

Enhanced customer experience in the banking and financial services sector through IoT-driven solutions is pivotal for meeting evolving consumer expectations. Institutions can offer tailored services in real-time by leveraging IoT devices, such as smart ATMs, wearables for payments, or personalized financial management apps. These solutions empower customers with seamless access to their accounts, personalized financial insights, and proactive fraud detection, fostering trust and loyalty.

Moreover, IoT-enabled experiences like automated loan approvals and predictive financial advice anticipate customer needs, enhancing satisfaction. Ultimately, IoT-driven enhancements elevate customer engagement, retention, and advocacy in the competitive financial services landscape by delivering personalized, convenient, and secure interactions.

Based on services, the global IoT in banking and financial services market is bifurcated into professional services and managed services.

Professional services in banking and financial services encompass an extensive range of specialized services provided by professionals to individuals, businesses, and institutions in the finance industry. These services are typically provided by highly skilled professionals with expertise in finance, law, accounting, and consulting. These professional services are essential to the banking and financial services sectors' operation because they help customers handle their money, comply with regulations, and make wise investment choices.

Based on end-users, the global IoT in banking and financial services market is bifurcated into banking, insurance, and others.

The application of IoT (Internet of Things) technology in the banking sector offers numerous opportunities to enhance operational efficiency, customer experience, and security. IoT-enabled security systems can provide advanced surveillance and access control capabilities to protect bank premises, ATMs, and data centers. These systems may include video cameras, motion sensors, biometric scanners, and smart locks, which can be integrated with central monitoring systems for real-time threat detection and response.

Moreover, IoT devices such as beacons and sensors can collect customer behavior and preferences data within bank branches. Analyzing this data allows banks to gain valuable insights into customer needs and preferences, optimize branch layouts and product placements, and personalize marketing and promotional campaigns. Thus, such uses of IoT in banking drive the segment's growth.

Impact of covid-19

The pandemic led to a temporary lockdown of the nations, which on a wide scale hindered the verticals of businesses and the industry. The automobile industry, which primarily involves outdoor jobs, has been poorly exposed to the challenges that have contributed to a dramatic decrease in car sales. Furthermore, the instability of the supply chain market mainly due to the closing of national and foreign borders and the adherence to the decision not to use Chinese produced products hampered the growth of the market. However, the considerable spike seen in the sale of the automotive vehicle to limit the usage of public and crowded places may positively affect the growth of the market in the upcoming years.

Recent Developments

• November 2023- Financial Software & Systems Pvt Ltd (FSS), a prominent worldwide supplier of payment technology solutions, announced the recent launch of its IoT and AI/ML-enabled ATMs in India.
• January 2024- Vodafone Group Plc and Microsoft Corp. signed a ten-year deal with a USD 1.5 billion investment to enhance numerous business sectors, including artificial intelligence, digital payments, and the Internet of Things.