IoP – Internet of payment for dummies
This #PayDecoding, IoP – Internet of payment for dummies helps you to keep up appearances in front of your kids… and push your expertise a little further!
Whatever the sector, whether in the automotive industry, retail, leisure, food, … all human activities are more or less quickly moving into the world of the Web and this virtualization of the physical world opens the door to new use cases in payment.
In its most basic sense, the Internet of Things (IoT) includes any object or “thing” :
- uniquely identifiable,
- connected to an Internet network (Wifi, LoRa, Sigfox, NB-IoT, 5G etc.),
- that can communicate by exchanging data.
The Iot includes 3 natures of devices:
- objects directly connected to the internet,
- machine-to-machine communication (M2M),
- and communicating terminals (tablets, smartphones, watches, etc.).
Over the past 10 years, IoT has grown exponentially: factory equipment, monitoring tools, smart meters (water, gas, electricity, …) and thermostats, home appliances, trackers, healthcare equipment, wearables, car equipment, mobile devices, smartwatches, connected speakers, robot vacuum cleaners, etc.
IoT devices are the endpoints that collect retail and customer data. In the finance industry, this information is invaluable.
For fintech, IoT multiplies the payment acceptance network by converting any connected device, or terminal, into a shopping platform.
This new set of capabilities is called the “Internet of Payments” (IoP).
The protocols that govern IoP are still evolving, but when combined with the cloud, big data, artificial intelligence and biometrics, they have the potential to become the next hypergrowth sector.
The relationship between IoT and IoP is becoming obvious:
Any object become a payment terminal!
And it is the M2M market of IoP that is growing fastest (it is expected to reach more than $27 billion by 2023): that is, devices that manage to execute payments themselves without human mediation.
In an M2M transaction the human is informed after their device has made a purchase.
Examples of IoP:
- A car or bike able to directly purchase insurance, paying for tolls or parking.
- Gas stations able to interact with vehicles to serve them fuel and directly negotiate payment:
- Chevrolet partnered with Shell to allow drivers to pay for gas from their vehicle’s infotainment screen
- Hyundai partnered with Xevo to pay for gas from the vehicle’s screen.
- Printers able to request and pay for their own toner when they detect that the current toner is running out.
- Refrigerators able to make product purchases based on the needs they detect and then making payment.
- Samsung’s Family Hub™ connected refrigerators allow users to order groceries and pay through the MasterCard Groceries app.
- Heating or cooling systems that, in the event of a breakdown, can contact the technical service to correct the problem and pay the technical service later.
- Supermarket checkouts that automatically collect the balance of purchases calculated at the checkout from the user.
- A ring (Aeklys), a child’s object (Moneywolkie) or an implant (Walletmor) that replaces sensitive payment account information with a secure token so that consumers can make payments with a single touch.
But the “cloak of invisibility” placed on the act of payment is not without its own reflections on multiple levels:
ethical, philosophical, responsibilities, security, trust, governance of the exploding data, regulatory compliance, hardware and software technologies…
The success of the IoP will also depend on the convenience it can offer the customer.
Today, price is often the determining factor in a purchase, but in the future, customers will increasingly choose the product, which they don’t actually have to choose themselves, because the decision will be made automatically.
In other words, convenience will trump cost!
In this new world, market share will not be gained through price but through exclusive partnerships.
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