Posted by Alison Arthur and Bethany Frank on 09 Sep 2019
Once an abstract concept, the Internet of Things (IoT) is now a tangible global sensation. Smart appliances, connected automobiles, and wearable technology are just a few examples of the IoT that are changing the way consumers interact with the world around them. And the IoT just keeps growing. A recent IDC forecast estimates that there will be 41.6 billion connected devices by the year 2025.
The IoT also provides ample opportunity for players in the payments space to capitalize on this phenomenon. The realization of a concept like the IoT, which essentially enables machines to preemptively fulfill needs based on data, suggests to consumers that their payment experiences should be just as efficient. Consumers now expect payments to integrate seamlessly into their everyday lives through their IoT devices.
Examples of the IoT
Amazon Echo and Google Home are among the most recognizable smart speakers. Driven by AI-powered intelligent personal assistants, these devices can provide information about everything from traffic conditions to recipes. They can also be used to help consumers manage their finances, from looking up account balances to making bill payments with simple voice commands.
The IoT also enables new and enriched shopping experience for consumers while simultaneously presenting lucrative revenue opportunities for merchants. Some retailers are investing in beacon technology to send push notifications, promotions, and coupons to shoppers as they enter their stores. These types of enriched shopping experiences can help traditional retailers bridge the gap between online and in-store shopping, possibly leading to increased sales.
Connected cars are becoming more common, with over 125 million passenger cars with in-car internet forecasted to ship globally between 2018 and 2022. Internet connectivity combined with apps like Spotify and Netflix make in-vehicle entertainment a fully integrated and seamless experience. Auto insurance companies are also leveraging the IoT to track the driving habits of their customers and offer discounts for safe driving.
Smart home devices are streamlining our daily lives like never before. From smart refrigerators that can reorder groceries to video doorbells that help keep our homes secure, almost every part of our home can be streamlined by the IoT. And smart speakers can help join these disparate smart devices together into one central command center, making it easier to manage them all.
What does the IoT mean for payments?
The explosive connectivity that the IoT delivers is poised to increase payment transaction volumes, making a robust payments infrastructure a fundamental component to sustained success. Financial institutions and other payment service providers can help businesses prepare for monetization opportunities by offering comprehensive services that can integrate into the fast purchasing environment made possible by the IoT.
It’s also important to note that the rapid expansion of the IoT can expand payments risk and fraud as well. Banks and other stakeholders will have to keep the possibility of increased fraud in mind and develop additional security measures to verify and protect consumer identities.
The Bottom Line: As consumers continue to leverage the IoT for increased connectivity and convenience, there is an opportunity for financial institutions and payment service providers to gain a competitive advantage. This advantage can be realized with a balance of innovation, security, and user-focused design.
*This is an update on an original post published October 2016