In recent years we have seen a growth in the use of the Internet of Things, also known as IoT. It defines the interconnection of diverse objects, such as vehicles, glasses and appliances, among others, which, by connecting to a data network, exchange information and perform predetermined tasks. These devices are enabling an increasingly interconnected world to exist and, in the payment field, promise to create a new business model that offers consumers convenience and agility.
A survey conducted by Gartner in 2017 predicted for the year 2020, about 20 billion devices connected to the internet. But determining the actual number of connected devices is not such a simple task. Any search on the internet can bring quite divergent results, as they may use different criteria for the search, such as considering devices intended for a specific area.
However, we can see an exponential increase in the number of devices connected in recent years, showing a growing trend in their use. This brings us to an increasingly integrated world where processes can be simplified and automated.
IoT enables technological advancement in several areas. In the automotive industry, for example, smart cars can access traffic information to make better road decisions. Smart homes allow remote management of temperature, ventilation and lighting. Appliances can look up recipes or nutritional tables of foods, also remind users of their appointments.
In the field of payments is no different. There are already smart devices that make payments without the need for cash or cards, and trends that promise to revolutionize the way we pay.
- Having a device connected is a growing trend.
The average consumer had 4.4 devices connected at the time of the survey, compared to 4.2 in a survey 1 year earlier. Devices include video game consoles, physical activity monitors, smart watches, voice-assisted assistants, and virtual reality glasses.
- Consumers who have more devices connected buy more.
Connected consumers make purchases more often and in larger quantities – and their purchases span multiple product categories.
- Buying things using a connected device is a popular practice.
50% or more of consumers surveyed had made purchases online using a device connected in the study week.
A relevant point identified in the survey is that most respondents reported that despite the benefits such as agility and practicality of connected devices, they still worry about trust and security issues when using a service where devices make payments autonomously. Points such as data privacy and accuracy in purchase orders are the items of greatest concern. Thus, banks and credit card providers already consolidated tend to have the advantage to make this model viable, since they already have a customer base that trust their products.
The most common IoT devices used today as a payment method are smartphones and smartwatches. They offer consumers agility when paying their bills. These devices are powered by contactless technology, and by relating a card to them through a digital wallet, a user is able to pay bills as if they are carrying their own credit or debit card. Other devices that, integrated with bluetooth, Wi-Fi, and Near Field Communication (NFC), can be used as payment, are bracelets, glasses, rings, and voice assistants.
With increasingly demanding consumers looking for convenience and agility – without having to wait in a queue to pay for their purchase – it is believed that there is a demand for a standalone payment model, without the need for interaction between those involved. And this will only be possible with the use of smart and connected devices.
This business model is known as “invisible payment” in several payment technical articles. The basic concept is: you enter an establishment, choose your products and leave with everything paid, without interaction with anyone. This concept can be applied, for example, to gas stations where the vehicle itself would pay for fuel.
Another possibility is smart supermarkets where there are no attendants or places to checkout your purchases. Simply placing the products in the cart already calculates the value of your purchase, and when you leave the store, payment is automatically made by whatever device you are carrying – such as a watch, bracelet or mobile phone.
An example of the application of this can be seen on the Amazon Go supermarket chain. In these stores, the surfaces with products – shelves, refrigerators, tables etc. – are equipped with IoT to be able to detect which products have been removed by each consumer (which, in turn, is identified through the Amazon Go app on their smartphone). Information about which products have been taken is added to an in-app shopping cart and payment is made automatically when the user leaves the supermarket.
In this kind of smart store, the collection of consumer information through communication with IoT devices is continuous – through IoT devices involving cameras, RFID, sensors it is possible to identify what each consumer bought and also the consumer himself, having access to data from previous purchases, how often to buy a particular product, and other data. All this information will enable an individual analysis of consumer behavior and thus a range of opportunities for targeted marketing.
In contrast, one of the types of information collected with IoT is payment data, which requires a high level of security in its processing. This is a concern raised by research on smart device users, which shows that investing in consumer data security – especially payment data – is essential for a smart establishment to be frequented.
To adapt to these new technologies, the current sales and payment model needs to be rethought. These are new challenges and risks and adequacy will be needed by both retailers and payment service providers. Investments in infrastructure and security will be the basis for this new model to become viable. Other criteria that need to be assessed concern the level of autonomy this model will have. For example, what will be your decision-making power to pay a bill? Any amount up to the available credit limit?
As we can see, the invisible payment is a model that tends to revolutionize the way we buy and pay, but it may take some time to adopt. High investment and consumer resistance to allowing an extremely automated model tend not to encourage retailers, at least the smallest, to deploy the model. Big companies, such as Amazon, are expected to implement model stores, demonstrating to consumers and retailers alike that invisible payment is a valid model.