Self-driving cars, autonomous machinery and other computerized items will one day have bank accounts they can access without human intervention, Huawei and SPD Bank said in a white paper Monday.
The Chinese bank and tech company found in a forward-looking study that several technological sectors are converging on financial services, and will soon be able to link the financial sector seamlessly with commercial property and “smart” consumer devices. The authors call for the development of a “bank of things” to service nonhuman account holders.
Shanghai Pudong Development Bank and Shenzhen-based tech giant Huawei see 5G, artificial intelligence and Internet of Things technology converging to a point where devices can be connected, responsive and able to respond to certain needs, such as a car driving to a gas station and purchasing fuel or an autonomous factory purchasing more supplies without any human initiation.
Key to this step is the spread of 5G technology, which is anticipated to greatly increase internet connectivity speeds, solving inconsistent connectivity issues that have hampered the growth and adoption of the Internet of Things market.
The authors view the bank of things concept as an important hub for lenders, who will have greater insight into the creditworthiness of borrowers due to the massive data production that will result from billions of new connected devices coming online.
“Multi-dimensional data in the IoT [Internet of Things] era is closer to that of the physical world, supporting effective assessments of credit ratings,” the authors wrote. These data sources can be used to create a “risk management toolbox based on objective data,” which could provide a more holistic view of someone’s financial standing and activity.
“This new risk management model enriches credit data sources, improves data credibility, and allows more natural and legal persons to enjoy financial rights, facilitating financial inclusion,” they argue.
The Shanghai-based bank with $1.01 trillion in assets as of 2019 and the telecommunications and consumer electronics company noted that lenders might be more open to borrowers who perform poorly on traditional metrics such as credit scores if lenders had a more complete data profile of them.
This update to risk modeling is necessitated by two major flaws in the current system based on subject credit data, the two companies explain.
“First, subjective data may be forged, and comprehensive data cross-verification is expensive. As a result, many credit services cannot be carried out, such as loans for SMEs [small to mid-sized enterprises] and long-tail individuals. Second is credit delay. A model based on static data cannot reflect real-time credit status.”
With torrents of data from individuals, companies and even local governments, a bank of things could leverage analytical technology for a more current and accurate picture of credit risk.
The bank of things “uses IoT hardware to obtain a large amount of credible data, such as industrial enterprises' production activity data, people's behavior data, and smart cities' operational data. BoT [bank-of-things] can then establish a new risk assessment model for banks using technologies such as neural networks.”
The authors note that the number of connected devices will reach 25.2 billion by 2025, citing the mobile operator industry group GSM Association. More than half of these will be industrial devices.