This article by Suman Chandra, a director at Westborough, MA-based Virtusa Corporation, considers how the IoT phenomenon is already impacting and, may further impact, the wealth management industry.

According to one definition, IoT - or Internet of Things - refers to the network of physical objects, devices, vehicles, buildings and other items which are embedded with electronics, software, sensors and network connectivity, enabling these objects to collect and exchange data.

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The Internet-of-Things (IoT) is a buzzword across the globe and across industries. The Trend Report on IoT, jointly released by DHL and Cisco, estimates that 50 billion devices will be connected to the internet by 2020. By then, digital devices with internet connectivity (tablets, PCs, smartphones) will constitute 17 per cent while the remaining 83 per cent will be smart physical devices. The retail, automotive and manufacturing industries are likely to reap huge benefits by marrying the physical world and the digital world. But what about wealth management or private banking in the age of IoT?

It’s true that with the emergence of digital technologies, wealth management has already undergone a major change; clients don’t need to depend only on advisors as they can be self-serving. This not only lowers cost of service and gives more control to the clients but also paves the way for much more affordable value to the growing segment of emerging wealthy.

Wealth management or private banking products are more notional than physical or tangible, so IoT use cases in this industry/domain are still at a conceptual phase that requires creativity and commercial viability. However, with the advent and adoption of IoT, there is immense potential in wealth management.

The benefits will primarily exist in three broad categories:

Innovation - As IoT connects multiple devices, including sensors, networks and other physical objects, it will lead to an explosion of data. Analytics will play a pivotal role in collating, analyzing and generating mass-level customized offers and discounts in real time. Consider a high net worth customer traveling abroad and receiving a notification in his/her mobile phone when passing a billboard of a luxurious car or villa or other expensive product of his/her taste, along with the discounts and steps to purchase that product. Meanwhile, as IoT combines with biometrics and other security measures, security and privacy will become much more digital, robust and failsafe.

Growth of industry - In the age of IoT, industries won’t be restricted; there will be greater collaboration between and among them, causing new business models to manifest. Wealth management won’t be restricted only to banking or financial services. For example, the insurance industry may join hands with private banks to invest more on up-front costs to lower claims in the future and thus provide preventable solutions to clients.

Productivity improvement – With various smart devices becoming connected in IoT, it is quite apparent that the front-, mid- and back-office of IT systems will be better integrated with other relevant smart devices leading to a superior client experience. Already today, HNW individuals can connect with their advisors via their smartphones. Likewise, clients are increasingly provided with real time visibility of their portfolio and receive wealth management services through “smart” devices anytime, anywhere. These measures are increasingly boosting productivity across the industry through overall savings in cost and time.

Use cases for IoT in the banking industry, let alone wealth management, are still at a conceptual level. User touch points and adoption rates will depend on factors such as usefulness, ease of implementation, security, regulation and commercial viability.

However, it is certain that IoT will shape wealth management in such a way that productivity will be further improved, further innovations will come along and new revenue streams will be uncovered.