Why the IoT needs to revolutionise the payment industry
“Do you take cheque?”
“Just cash or card I’m afraid”
“I’ll use my partner’s card, don’t worry”
“Also, there’s a charge for transactions under ten pounds”.
This is not an uncommon retail scenario these days. Consequently, the finance industry and specifically payments is undergoing a much-needed facelift. Although ‘facelift’ could be the wrong way to describe it, as this transformation is more than just adding the Android logo to the checkouts at Pret a Manger. This is a revolution from the heart of payment infrastructure outwards. We’ve previously covered partnerships and standardisation here, so let’s concentrate on use cases and where this IoT payment journey might take us. In a way, the payment industry is the originator of the Internet of Things as we know it now. Before beacons, cat flaps, intelligent traffic lights there was contactless payment. Devices reading data, communicating.
If contactless payment is a (ironically) tangible, real-world everyday benefit of FinTech then Apple and Android Pay have taken that baton and ran off with it, with more retail outlets and apps optimising their payments systems for smartphones and wearables by the day. And, if more smartphone-connected wearables and standalone IoT-enabled clothing and accessories have the capability, the natural step is to look at how smaller devices and even implants can further streamline your payment journey. Smart contact lenses, rings and tattoos can all be enabled to carry out payments for you. A rigorous, app-based pre-approval system is easily set up, allowing you to pay for certain goods up to an agreed limit using the clothes you’re wearing, and eventually iris scans.
To go further, if we know an iris scan could be used for unlocking a car and starting its engine, isn’t the car now an active extension of the user? Wouldn’t it be ok to pay at the drive-thru by scanning – if not your iris – something as ‘primitive’ as your number plate, given that the car has already authenticated that it’s the owner driving? The same goes for car washes, bridge tolls – it’s already working in some cities for congestion charges. The opportunities for saving both money and man-hours are huge.
As with the technological revolution of any industry you care to name, those who don’t adapt, fail. We will certainly see a reduction in the number of traditional payments middle men, coupled with a rise in smaller tech-first companies that thrive on their agility. Write off the larger companies at your peril, however: Visa is just one of the larger companies that’s betting heavily on IoT with Visa Ready, and the company’s also expanded its Visa Token Service for secure authentication across many more payment environments, ready for significant change brought on by the possibilities of the IoT.
Other payment giants getting heavily involved with the IoT are Mastercard, who earlier this year partnered with Samsung to create ‘Groceries by Mastercard’. Your fridge detects you’re low on butter and…well, we all know the rest. Couple this with another partnership with Coin around wearables and it’s clear that it’s not only the small players who are leading on innovation.
So how will the IoT’s influence on payments be felt in finance more broadly, and in other industries too? Say your manufacturing partner ships a consignment of cars to your dealership. In theory, you could pay the manufacturer there and then. But would you? Cashflow and revenue are based around a degree of necessary friction in the supply chain to work, so for instant payment to suddenly become available would give some unwanted weight to the oft-used term ‘disruption’. A slow and steady integration of IoT payments at enterprise level is key to acceptance and adoption, with clear signposted articulation of the benefits to all parties involved.
Finally, let’s talk about the environment. No-one likes cheques. They’re easy to lose and made of an unsustainable resource. The same can be said for credit and debit cards. From an environmental resources perspective, the IoT payments revolution is not just a no-brainer, it’s essential. The one, massive landfill-sized obstacle standing in its way, impeding even faster progress? Cybersecurity and governance. There’s a reason why companies in the fintech space employ so many lawyers. So – even though the benefits are demonstrable, the public need to know how safe their money will continue to be. And this will be the biggest development in the payment industry’s relationship with the Internet of Things: winning the hearts and minds of the people.
Contactless payment market penetration will continue to increase, and as wearables proliferate, smart home devices come down in price and the supply chain further automates, we are looking at fertile ground for planting the seeds of change in the payment industry.
Author: Jon Kennard
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