How finance services can help the IoT industry foster consumer trust

Issue 7 2023 IoT & Automation

The Internet of Things (IoT) has risen across the tech industry and become more prominent in our daily lives by connecting devices and enabling seamless automation. There are still, however, many significant challenges when it comes to building consumer trust.

There is a huge disparity in trust between financial institutions (FIs) and IoT technology, according to a recent survey. I will explore the key lessons learnt from our research and discern what the IoT industry can do similarly to the financial services sector.

There is a trust disparity between IoT and finance

The 'Circles of Trust' survey highlights that IoT technology has low levels of trust compared to FIs. This could be attributed to a lack in understanding of the term ‘IoT’, with only 23% of global respondents confident to define the term. On the contrary, 64% of respondents expressed some level of trust in their banks, soaring to an impressive 72% in the United Kingdom.

Additionally, 57% of respondents worldwide said that they were concerned about the security of their smart home devices, a figure that spikes to a concerning 69% in Mexico. This anxiety is not without basis; IoT-related hacks are increasing, common malware is being updated to target IoT devices and even smart fridges are vulnerable to intrusion.

Despite this huge disparity in trust, only 26% of respondents claimed to have been affected by IoT security breaches. Although it may seem unusually high when compared to the 22% who reported theft from their bank accounts, it is not sufficient to explain such significantly higher levels of trust in FIs. So, what factors contribute to this trust gap between two seemingly unrelated industries?

Visible vs. invisible security

Firstly, the most critical difference is regulation. IoT is a fairly new industry, whereas banking has been around for hundreds of years, and banking regulations are a major part of every country’s governance, with international agencies like the Basel Committee on Banking Supervision (BCBS) and the EU’s Basel 3 responsible for the complicated matters of international finance. Although the majority of people have limited knowledge of these regulations, they can at least be confident that government bodies are keeping them safe.

Another crucial factor lies in the transparency of security measures. Finance security systems are highly visible to consumers. They can monitor for suspicious transactions, use two-factor authentication, and can visit their bank branch in person for assistance. These formidable security solutions allow consumers to feel in control, fostering a sense of trust.

Meanwhile, IoT security is less visible to customers. It often operates behind the scenes, hidden from the end user. For example, smart doorbells or TVs can receive updates automatically, but customers cannot access as much information on how these updates impact security or maybe even on when they take place. This uncertainty could lead to a feeling of vulnerability and disconnection from the security measures.

Therefore, to harness more trust in the IoT industry, we must take inspiration from financial services and make security more visible and understandable to consumers. Here are some key strategies:

1. Transparent communication: IoT companies need to adopt similar practices to FIs who are adept at communicating their security measures with customers. Whether it is sending email alerts for account activity or providing detailed explanations of security protocols, they keep consumers informed and, more importantly, an active part of the security process. They should communicate openly about security features, provide regular updates on vulnerabilities and patches, and offer accessible customer support channels for security-related concerns.

2. Education and empowerment: More education is needed for building confidence in IoT usage. The finance industry educates consumers by guiding consumers on setting strong passwords, enabling multi-factor authentication, and explaining the importance of regular device updates. Empowered users are more likely to trust in the security of their IoT devices.

3. Accountability and liability: FIs are legally obligated to reimburse customers for unauthorised transactions, instilling a sense of confidence. IoT companies should also hold themselves accountable to security breaches by implementing similar policies and providing compensation or assistance to affected customers.

4. Collaboration and standards: The IoT Industry should work towards developing a well-established framework of regulatory standards and industry best practices. FIs have already established these similar standards and certifications for device security. Collaborating with experts, regulatory bodies, and industry peers can help create a more secure IoT ecosystem.

Unlocking IoT potential

More efforts are certainly needed to bridge the trust gap between FIs and the IoT industry. Proactive steps can be taken to improve the visibility and communication of security measures that set these industries apart, despite the challenges associated with interconnected devices.

Adopting strategies such as transparent communication, education, accountability, and collaboration can help ensure customers that their IoT services are actively engaged in security. As we move further into the IoT era, more work is still needed to be done to unleash its full potential and harness a safer and more connected future.

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