What is the opportunity for IoT and payments?
The Internet of Things (IoT) has the potential to disrupt any number of industries, from manufacturing, to healthcare, and insurance. But one of the biggest opportunities out there is with the payments industry.
Plenty has already been written on the opportunity for IoT and payments. An article from Yale Economic Review this time last year opined that “the Internet of Things will revolutionise the payment industry.” The opportunity extends not only to the end user, for whom automated payments will lead to greater convenience and smarter transactions, but to payments companies, retailers, and technology manufacturers.
Increasingly, payments providers and tech firms are partnering up. One such example is Ingenico Group and Intel, who announced a collaboration back in April promising “innovation [which] can simplify the purchasing experience and further enhance the merchant-consumer relationship”. Among their projects is a mobile tablet which supports EMV and NFC functionalities, although more ambitious plans include vending machines and digital signs with payment capabilities.
Elaine Cook is EMEA strategic marketing director for IoT at Intel. She notes Intel’s USP in the market is the scale and breadth of the solutions the company can offer. “We have gateway solutions and extremely small low power processors in our Intel Core processor line that can go right at the edge of the Internet of Things,” she explains. “How we enable NFC and SDN in the communications networks to be able to cope with enhanced levels of data that are going to be generated through IoT.”
Seeing the opportunity in every difficulty
Ask anyone connected with the IoT industry to define the challenges it faces, and two subjects will invariably crop up; standardisation, and security. The good news is payments is not particularly affected by the fight for standards – and security is something which can be overcome too.
Andrei Charniauwski is head of Europe at IDC Financial Insights. He explains: “We shouldn’t be expecting any standardisation in the IoT space – but when it comes to payments, I think we actually have a pretty robust set of schemes around the world that you can plug into anything. You don’t really need to standardise the IoT devices for that matter, it’s more about how you connect those devices to payment gateways that execute payments.” Cook agrees. “I think we’ll continue to see multiple standards [for IoT] and I don’t think that necessarily hinders adoption,” she says. “I think we will gradually see consolidation.”
For security, Intel’s security group has identified almost 20 factors that the company believes every embedded device should possess in terms of its security functionality. “Obviously that’s a constantly moving target and something we’re very, very focused on,” Cook adds.
In some cases, it is not a question of security, but data ownership which needs to be addressed to take full advantage of the opportunity IoT and payments presents. Cliff Russell, a senior consultant for UK-based payments system provider VocaLink, identifies several key questions that need to be answered. Which device is making a payment? Which person or legal entity is the device acting on behalf of? Where is the liability?
It is a view with which Charniauwski agrees. He explains: “When it comes to payments, it’s people’s money, it’s your money, and you want to be in control of your actual payments in terms of authorisation. When it comes to IoT, it means we trust machines or devices to authorise payments for us.”
Again, this is being dealt with. For Ingenico and Intel, Intel’s half of the bargain is providing CPU technology and, in particular, Intel Data Protection Technology for Transactions, which combines encryption and point of sale device management so data can be tracked whether it goes to a merchant’s system or to a card processor.
A utopian vision of automated payments
But if a pessimist sees the difficulty in every opportunity, an optimist sees the opportunity in every difficulty. Russell argues “enabling payments is key to the IoT business case”, and “data and payments will become inextricably bonded.” In time, Charniauwski hopes, users will have a ‘digital identity’ where everything from payment details to digital signatures and biometric data will be stored.
“I would love to see every person in the world owning their own repository of their data and digital assets that they can use for various functions,” he explains. “I think connecting that repository to the universal range of IoT devices will essentially enable products and service providers to embed payments that are used with the person’s payment details into pretty much any device in the world.”
Closer to home, IoT influencing payments is also apparent. Imagine that in your smart home, your fridge would be connected to the Internet and understands what food you put in there, how long it takes for you to consume it, and so forth. It can then put together a shopping list based on your preferences and then, the natural next step for it would be to order the list online and pay for it using your payment details.
This utopian vision is still a while off, Charniauwski argues, but is more than attainable. “I can always look at my repository and say ‘I don’t want my card to make payments anymore, I don’t want my fridge to make payments anymore, but maybe I want my built in chip to make payments if I want to’,” he says. “This is the ideal world for me.”
A further discussion on IoT payments will be taking place within the Connected Living track at the IoT Tech Expo Europe 2016, exploring the digital wallet evolution, the integration of payments within IoT devices and strategies for simplifying the purchasing experience to enhance consumer relations.
Written by: James Bourne, Editor, TechForge
Image credit: (c)iStock.com/IoT3_rzoze19