The Role of IoT in Payments
The Internet of Things (Iot)
The internet has become intertwined with our everyday lives. We use it for our source of news, shop for our favourite products, to stay connected to our peers, and to check our bank accounts, among a million other things.
As consumers become more technology savvy and connect to different devices, seamless payments become table stakes. In 2017, e-commerce sales accounted for 7.3% of all retail sales in Canada, generating $20.2 billion USD in revenue.
As consumers become more comfortable with the idea of paying online, it is only natural that merchants should want to capture this market and obtain valuable information about their customers, online and off. How they connect is the essence of the Internet of Things.
The Role Of The IoT in Payments
To ease the shopping experience for the consumer, merchants seek to make a frictionless payments experience. The IoT is the driving force in making this happen. For payments, the IoT means that a consumer can pay in almost any way possible.
Think about that for a moment.
Instead of a card, consumers could pay with their phone, a wearable, a car, or a voice-activated device (“Alexa, order me a pizza.”). For businesses, this means enabling things other than a standard in-store terminal to authorize payments. The IoT extends the connectivity between things without the need for human intervention.
The need for payments to be processed automatically applies to both the B2B and B2C worlds. A smart fridge could identify when you need to buy milk, make the order, and have it delivered, all without you never having to lift a finger. A business can buy a printer that tracks toner usage and orders via Amazon once it reaches a certain level. The use cases are endless.
Think about when a consumer logs into a mobile app like Apple Pay. The user can make in-app purchases without ever having to re-enter their credit card information. Consumers can also pay with fingerprint identification, allowing them to make purchases in seconds.
Applications such as this are quickly becoming the norm, but for them to operate successfully, information needs to be kept safe.
Keeping Payment Data Safe In The IoT
Along with the many benefits of the IoT, the risk of a security breach cannot be ignored. With so much information shared across many devices and things, it is inevitable that hackers will try and get access to this valuable data.
Of the billions of connected devices, many were not built to be PCI compliant. Connected devices need to be kept safe as virtually any device is a potential point of entry for fraudsters. In the world of payments, it is crucial that all devices adopt the PCI protocol to ensure that any companies that transmit sensitive credit card information maintain a secure environment.
User authentication is another big issue in the IoT. If we take the printer example from above, what happens if the printer orders $1000 worth of toner instead of $10 because the account was hacked?
It is crucial to develop an understanding of who can be held accountable for outcomes such as these. If the person who authorized the transaction cannot be established, who can be held responsible in the event of a breach?
The answer lies in tokens. Tokens will reign supreme for payments in the IoT.
Tokenization programs are being created specifically for the IoT because they will be vital in preventing data breaches. User authentication can be tied back to the payment token, creating security and ownership for a transaction.
IoT Technology Solutions
IoT for the Platform, Merchant, and Customer
The applications for IoT in a retail environment are already in effect omnichannel experience. A customer may start their shopping journey on one device and end it on another, but still expect the same seamless experience they would have as if they shopped on one device.
Retailers need to integrate into a platform that allows them to bring this seamless shopping experience to life. A platform in the IoT connects the gap between the network of data and the devices, providing insights using backend applications like the cloud to make sense of the mass amount of data.
A platform in the IoT makes it easier for developers to connect device sensors for applications ranging from goods or services. These sensors can be used to provide suggestions on a retailer's mobile app to alerting you if you left the lights on at home.
IoT impact on the Checkout
IoT can be at work from the moment we enter the store to the moment we leave. The self-checkout is commonplace, and with applications like Amazon Go, the physical checkout will eventually go the way of the dodo. Check-in (to a mobile app or store) will become the new checkout.
IoT and Smart Cities
IoT technology solutions can also be tied into smart city initiatives. The IoT will be instrumental when it comes to effectively managing water, energy, transportation, and environmental issues,
Consumption for things like energy and water can be monitored to ensure they are being used efficiently, tying in payments to manage the consumer behaviour.
The Future Of IoT
Approximately 20.4 billion devices will be connected by 2020, more than the number of people that will be living on the planet. With each person likely having multiple connected devices, the amount of data sharing and information available is limitless.
The seamless payment experience of the IoT will be at the forefront of propelling this connectivity. The IoT is expected to generate $13 trillion by 2025. Merchants and retailers will want to use consumer data to create the most seamless payment experience possible.
The IoT will continue to grow in ways we can’t imagine. Devices will get smarter as applications like artificial intelligence (AI), and blockchain get incorporated into the mix. If everyone abides by the rules of the game, and the information is kept secure and used to benefit society, there is nothing to fear, quite the opposite; it should be embraced.
The IoT can help us be more conservative of our already scarce resources, effectively manage our cities, and, at the very least, make sure we never run out of milk again (thanks, smart fridge!).
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