Internet of Things and (mobile) payments interaction will lead to a change in the payment landscape

Monday 27 February 2017 | 11:42 CET | Background
Visa recently announced a partnership with IBM to bring the point of sale to everywhere Visa is accepted by allowing businesses to quickly introduce secure payment experiences for any IoT connected device, using its Visa Ready partner program to bring the Visa Token service to IBM’s IoT clients. It also announced to extend its tokenisation service to seven more countries in Europe, next the existing five countries. This combination of IoT and (mobile) payments will alter the payment world. 

The first platforms to use tokenisation were Apple Pay and Android Pay, while it has also been incorporated into Visa’s and Mastercard’s own digital wallets. Visa announced that in Europe the top five popular merchant categories for mobile payments are restaurants, supermarkets, transit, convenience food and drink, and leisure and entertainment. Its tokenisation service is currently used in France, Ireland, Poland, Switzerland and the UK, and during 2017 seven more countries will be added, although Visa didn’t announce which seven countries will be included.   

However the road to this started several years ago when Visa and Mastercard embarked on their journey to move away from the plastic form factor by launching their own tokenisation platforms, as is shown in NFC World’s latest ‘What’s new in Payments’ report. Amongst others tokenisation allows payments to become an integral part of a variety of connected devices. 

With the increasing importance of connected devices, it is not surprising that payment companies want to be part of this growing business.  According to IBM, they and Visa share a vision and commitment to embed payments and commerce into any device – from a watch, to a ring, an appliance or a car. As tokenisation provides a higher security level for protecting important data such as the consumer card details, it is well placed to be used as the basis for embedded payment systems within IoT devices.   

There are already products on the markets which automatically order things and where either a payment facility is already included or could be included, such as a Samsung refrigerator which can order items when the fridge detects it is running out. Samsung stated earlier this year that Samsung Pay would be integrated into its connected devices. Another example is the Amazon Dash button, which can for example be attached to a washing machine and then a simple press of the button will order new detergent. The increasing possibilities within the smart home and smart cities will be good place for IoT and payments to meet and this is likely to change the payment landscape from one where a consumer makes a conscious decision to spent money to one where things (a fridge, a car or a home appliance) initiate a payment procedure. 

These are however stationary connected devices and we would therefore not class these types of payments as being part of mobile payments. But with the Internet of Things other types of mobile devices could also see payments become embedded. As is already the case for smartwatches, it could be extended to for example smart jewelry, smart clothing, connected cars or certain health care devices. Some prototypes have been tested, but full consumer usage still awaits implementation and once adopted by the masses will significantly increase the number of mobile payments.

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