The Internet of Things (IoT), described as “software and sensors embedded in physical objects, buildings, and other items to enable these objects to collect, exchange, and execute data, grew rapidly during the pandemic.
There are currently 21.5 billion connected devices on our planet. According to World Bank’s Findex 2021 study, 1.4 billion people still do not have access to banking. The majority of these are women. In addition, 850 millions people in the world lack an ID of any kind, much less a digital ID. It is possible to use IoT for transactions and skip to a digital identity. This would improve access to financial services, and encourage economic empowerment.
In Papua New Guinea, a pilot project has tested a digital bank ID which meets the due diligence requirements of financial institutions using a biometric identification. The initiative contacted 2,548 people, of which 47% were rural women who were previously unable to open a bank. This initiative benefits 80% of rural and unofficial population.
The new ID allows for biometric identification which makes banking easier, and also improves security. It can also be used to collect information about consumer behavior. Spending patterns, which were not available before, can now be used to assess creditworthiness. This improves risk assessments and allows for tailored financial services.
IoT enabled gadgets and smart card readers are becoming more popular in Papua New Guinea. Payments can be made safely and efficiently using communication technologies such as Bluetooth, Near Field Communication and Wi-Fi. These technologies allow for communication between wearables and contactless cards as well as point-of-sale devices.
Payments can be made safely and efficiently using communication technologies such as Bluetooth, Near Field Communication and Wi-Fi. These technologies allow for communication between wearables and contactless cards as well as point-of-sale devices.
M-KOPA allows customers to spread their payments over a variety of household items, such as solar panels, smartphones and TVs. After an initial deposit is made, the system’s price is spread out over time in small installments until it is fully paid. The data of payback rates is used to secure the item as collateral once it has been paid in full. This allows consumers to obtain cash loans via M-KOPA. MiBank also approaches the asset’s sale in a similar manner.
IoT devices gather data on crop yields and soil conditions in the agricultural sector. This allows financial institutions to offer specialised financial services to farmers and to support them to make well-informed decisions about their finances, including gaining access credit and insurance.
We’ll likely see more innovative ways to use the IoT as technology improves. This will empower businesses and people around the globe and enhance financial services. To address infrastructure, capacity and standardization as well as regulatory frameworks, a comprehensive approach is needed. Internet of Things could change financial services, and create new opportunities for financial inclusion and economic development. Lotte Schou Zibell is the South Asia Department adviser at ADB. Senior public management expert Arndt Husar (digital transformation).
