Guest Columnist Law and Technology Legal Articles


Internet of things (IoT)

Internet of things (IoT) is causing a major disruption in the world of technology. It has changed the world in different ways and its impact on Financial Technology (Fintech) is no exception. In 2018 alone, the average expenditure on IoT in the banking and finance sector in the United States was estimated at $153 million,[1] making it difficult to ignore.

IoT can be described as a computing concept that describes the idea of everyday physical objects being connected to the internet and being able to identify themselves with other devices.[2] IoT could create a world where devices and persons are connected to the internet or to one another in such a way that they can transmit and receive information among themselves. This includes anything from wearable devices, cars, cell phones, computers, components of a machine, gas cooker, alarm clocks, etc. “A thing” in the world of IoT can be a person with a heart monitor implant, a farm animal with a biochip transponder, an automobile that has built-in sensors to alert the driver when tire pressure is low or any other natural or man-made object that can be assigned an internet protocol (IP) address and is able to transfer data over a network.[3]

Financial Technology (Fintech)

The Fintech industry has transformed the ordinary world of depositing money, lending, insurance and transfer of money from the era of traditional banking to a time where these banking facilities are easily accessible to the common man without the complexities of the traditional banking. You can stay at home and carry out your transactions from anywhere and at any time. Examples of Fintech start-ups in Nigeria include Paga, Cowryrise, Piggy bank, Kudi, etc.

Impact of IoT on Fintech

Data collection and improved customer service and consumer-specific products

It has been stated that the primary benefit of Fintech IoT is instant data collection and processing.[4] IoT sensors built into different devices such as cell phones, smart watches, home gadgets and cars help to detect information about consumers such as their habits, interests, lifestyles and preferences. They then transmit this information to relevant Fintech start-ups which can be utilised to provide services that target consumer habits and lifestyles or address consumer needs. The data can also be useful in the marketing of Fintech products as Fintech start-ups can now effectively tailor their marketing to be consumer-specific.

For instance, ‘Alfa Bank Sense’ is an advanced mobile bank application which predicts real-time customer financial behaviour and offers products or services that a customer might need at a point in time.[5]Another example is ‘Groceries’ which allows for effortless purchasing of Groceries.[6]

Safe, secure and improved financial operations

With the increasing growth of the Fintech industry, the increase in security risks associated with it cannot be ignored. IoT can be utilised by Fintech start-ups to improve the security of their networks to protect against cyber-attacks. It also can be used to promote secure, faster and more reliable financial service operations such as money transfers, lending, savings, insurance, etc. For example, there are several wearable devices that offer biometric authentication for money transfers and wireless payments making the wireless payments convenient and secure.[7] These wearables have the potential to transform cash withdrawal and wireless payments by replacing traditional cards or smartphones with smart devices. [8] There is also a smart wristband, ‘Nymi’ that uses the wearer’s heartbeat as the biometric authentication key.

Data security challenges

Despite the benefits associated with the use of IoT in the Fintech industry, fears have spiked up that the use of IoT would usher in a new era of security threats to users’ privacy and data. These fears are unsurprising considering how IoT interrelates with Finance: several devices intercepting and transmitting sensitive financial data of the consumers. The effect of any attendant breach and uncontrolled access to such can only be imagined.

Fortunately, companies are coming up with relevant technology to address these perceived threats. For instance, Global Positioning System (GPS) technology and biometric identifiers (fingerprints, voice, heart rate, etc.) are being coupled together to make unauthorised payments or access nearly impossible.[9]


The Fintech industry is disrupting the financial sector, making financial operations relatively easier and more accessible. The economic benefits and importance of IoT have been graphically shown. IoT solutions, if used in the right way, therefore, can promote the gradual and sustainable growth of Fintech industry by gathering useful data about Fintech consumers which would help the Fintech start-ups to provide consumer-specific products, improved customer service, and improved decision-making process. It will also promote safe and improved financial transactions and help address the data security challenges in the Fintech industry. However, a foreseeable problem to the growth of IoT in Fintech is the fragmentation of IoT devices just as it happened with the Android Operating System and cloud solutions which became more fragmented as they grew. This would, of course, cause challenges as may companies would struggle with the resulting compatibility issues. There is, therefore the need for adequate standards and certifications to control the IoT development in Fintech. There is also the need for an effective regulatory framework to control and improve the use of IoT in the Fintech industry.

[1] Mike Thomas, ‘From Fraud Protection to Customer Service, 7 Examples of How the IOT Is Giving Fintech Companies a Big Boost’ ( Built In, May 1 2019) <> accessed 30 August 2019.

[2] Techopedia, ‘Internet of Things (IoT)’ (Techopedia, undated) <> accessed 30 August 2019.

[3]Margaret Rouse, Linda Rosencrance, Sharon Shea & Ivy Wigmore, ‘Emerging data center workloads drive new infrastructure demands’ (TechTarget, July 2019) <> accessed 30 August 2019.

[4]Guest Writer, ‘Top 8 IoT Solutions for Fintech Providers (and How to Develop One)’ (IoT For All, August 17, 2018) <> accessed 27 February 2020.

[5] Tanmoy Ray, ‘Scopes of Internet of Things (IoT) in the Banking and Financial Services | IoT Impact on Fintech’ (Stoodnt, 29 December 2017) <> accessed 1 September 2019.

[6] Ibid.

[7] Ibid.

[8] Mary Aleksandrova, ‘How Fintech Startups Can Take over the Market with AI and IoT’ (easternpeak, 25 June 2018) <> accessed 30 August 2019.

[9]Savio S Braganza, ‘Why Fintech Should Seize Opportunities in Wearable Technology’ (inc42, 23 July 2017) <> accessed August 2019.

About the Author

Tobiloba Oluleye is a seasoned legal practitioner who provides first hand advisory and transactional legal services to a broad spectrum of local and foreign clients.

Tobi holds a Bachelors degree from the prestigious Obafemi Awolowo University, Ile-Ife, Nigeria where she graduated as one of the best students; bagging the Hon. Justice Orojo prize for Best Graduating Student in Law of Business Association and F.G Adewole prize for Best Student in Criminal Law respectively.

Tobi, an Associate of the Institute of Mortgage Brokers and Lenders, Nigeria, interned with an array of reputable law firms such as Wole Olanipekun and Co. and Perchstone & Graeys. Upon her call to the Nigerian Bar, she served as an Associate in Nigeria’s foremost law firm, Aelex Legal practitioners and Arbitrators.

Tobi is a writer and an active contributor to reputable legal content platforms including Mondaq and Law Axis 360°.

Tobi is an active Mentor volunteer under the Hands and Bridges Platform established to properly guide Nigerian Law School students towards achieving success in both their Bar Finals examinations and their career pursuits afterwards.

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