Payments and the Internet of Things

#News(General) [ via IoTForIndiaGroup ]

Here at Mercator Advisory Group, we are primarily focused on payments, and we have begun to think through what the implications of IoT might be for the payments industry specifically. It is helpful to think of forecasts as incorporating two main elements: economic value that shifts from one sector to another, and economic value that is newly created.
Whichever issuer gets its payment card token instantiated within the internet-connected device is going to get all of the volume, whether new or transferred. Most of these devices don’t have much of a user interface, so having assigned a card, the user is unlikely to switch cards unless a card expires or the account is closed.

Another way to think of IoT devices is as triggers, which generate new transactions, collectors, which gather data that can later be used to deliver value-added services, and channels, which can be used to deliver the value-added services themselves. For example, a smart speaker like the Amazon Echo is all three; it can be used to order things from Amazon (trigger), record the user’s music preferences (collector), and deliver value-added services, often for an added fee (channel). Other devices like a wireless home security camera are only one type (channel, for delivering remote monitoring of someone’s home). From a payments perspective, we are interested mainly in triggers, because these are what generate payment transactions.

For now, if you are an issuer, think of giving IoT the same sort of treatment as you do merchant categories that you are trying to penetrate, like grocery stores and gas stations. IoT providers are likely to have their own favored funding sources, like ACH. You need to provide your cardholders with incentives to say, “No, I really would rather use my card.”

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