The Important Role of IoT in Payments

One of the many innovations of the internet is new ways to pay. Thanks to the Internet of Things (IoT), that now extends to a growing number of connected devices. There will be as many as 20 billion of them by 2020, and they will raise consumer expectations of faster, safer payment options driven by data.

This IoT revolution goes well beyond smartphones and includes TVs, tablets, watches, cars, and a whole host of connected devices. There are even circumstances in which you don’t need a device at all, as with Amazon’s Go store in Seattle, which deploys cameras and sensors to monitor your purchases and charge a card on file after the fact.

Payment Preferences

As connected devices become more common in everyday life, consumers want the ability to pay from a variety of locations, which include:

  • At home. Smart speakers such as Alexa, Google Home, and Apple HomePod are fast becoming a regular fixture of a typical household, with 12 billion sold in 2019 (up from 900 million in 2016). Thirty-five percent of homes have at least one (75 percent of homes are projected to by 2025), and in 2019, it is estimated that 31 million people used smart speakers to shop for groceries, order takeout, and even call a plumber.

  • In the car. The connected car market is on the move, with expected growth of 270 percent and 125 million vehicles shipped by 2022. Advancements in the pipeline include self diagnostics that alert you when repairs are needed, communication with other cars on the road for increased safety, and alerts when your insurance company has a special offer. Many purchases are made during the commute, with 38.5 percent of them going toward gas, parking, and coffee. Automobile brands have jumped on the bandwagon as well—Honda, for example, has formed partnerships with PayPal, Visa, and MasterCard.

  • From their wrists. Shoppers have been using watches and other connected wearables for a few years now to pay for morning coffee, hail an Uber, or make a bank transfer. The market is only expected to grow, with 62 percent of wearable devices payment-ready by 2020.

And this is just the tip of the IoT iceberg. Connected devices are common in industries such as manufacturing, healthcare, and agriculture, among others.

Anticipating Customer Needs

In the near future, connected devices will not only allow consumers to easily pay for what they need in the moment, but they’ll also use AI and machine learning to anticipate someone’s next purchase based on past buying habits.

  • Smart TVs paired with streaming players such as Roku, Apple TV, Facebook Portal, or Xfinity Flex present a slate of movies and shows based on viewing history.

  • Smart fridges monitor your food consumption and automatically place an order when you’re running low.

  • Smart mirrors, which allow shoppers to access online and in-store inventory information and to pay on the spot for that sweater they’re trying on, are showing up in some fashion outlets.

Beyond Retail

The benefits of IoT in payments go well beyond retail sales; nonprofits and religious organizations have begun to make use of the technology. In the UK, Bristol Children’s Hospital placed kiosks around the city where donors could tap their smartphones or credit cards to support the hospital.

The UK has taken the lead on contactless donations, with startups such as GoodBox, which offers such products as a connected offering plate for churches. It’s easy to see how US charities could take advantage of this tech, which could perhaps one day replace the annual gala fundraiser or appeal letter.

Improved Security

Payment provider networks and card processors are making significant progress toward enhanced safety for IoT payments.

Mastercard and Visa both have adopted “tokenization” services, which remove any sensitive information from the IoT devices themselves. The system grants a “token” to a single device that allows for a very specific transaction: Your car can only automatically pay for tolls, or your fridge can only order a handful of predetermined groceries from one store. If hackers were to compromise your fridge or car, they wouldn’t find any personal payment data.

Credit card providers have also established security protocols and best practices that IoT device manufacturers must meet in order to provide safe transactions, including Visa Ready and MasterCard Engage, among others.

A Payment Solution That Connects Everywhere

Payments are now expected to be quick, easy, and everywhere. As more devices become part of the IoT payments family, transactions will get faster and more affordable for small businesses.

Payments as they are today will continue to evolve, and your business will likely need to change with them. A fully connected payment platform will help you navigate this shift and put you at the forefront of innovation.