“The interconnection via the Internet of computing devices embedded in everyday objects, enabling them to send and receive data” is one of the most commonly used definition of the Internet of Things (IoT). The concept of the IoT and the actual term going with it was first coined by Peter T Lewis well back in 1985 but with the rapid improvements in semiconductor technology we have now reached the point where many of us have our first real life experiences with this concept.
Whether it is a simple fitness band such as the one that my son is wearing, whether it is smart readers in the house combined with sensors along the electricity grid to optimise energy consumption or whether it is medical implants that provide real-time data to support the treatment of chronic diseases, the IoT is here to stay and will undoubtedly enter into more and more walks of life. McKinsey recently estimated that by 2020 there will be 20-30bn connected devices deployed.
In the payment industry the focus so far has been on wearables and the all too often quoted case study of the Samsung fridge that alerts us consumers when we have run out of milk and provides buying options for the next order. Then there are the Amazon dash buttons that ease the purchasing of more than 150 branded household products.
But one industry that has really caught our attention is the automotive industry. Cars or ‘Servers on Wheels’ as someone referred to them in a recent meeting are a great example for how new payment applications will make our life easier in the future.
At first many car manufacturers partnered directly with satnav providers to integrate their solutions directly into the car’s dashboard but now many of the same manufacturers are dipping their feet into payments.
- In January 2017, Daimler announced the acquisition of PayCash Europe with the intent to launch Mercedes Pay through Daimler Financial Services. In the press release a Mercedes Board member stated that “Mercedes Pay is a fundamental component of our mobility and digitization strategy. Daimler’s new payment system underscores our ambition, as a leading provider of digital mobility services, to make the products and services we offer even more appealing.”
- Also in January 2017, Honda announced a partnership with Visa to develop quick and seamless in-vehicle payments through smart phone integration. First proof of concepts demonstrations at the 2017 CES looked at in-vehicle payments for petrol and parking meters. “Payments have evolved from physical plastic cards to a digital, mobile wallet and Honda sees this as an opportunity to bring this technology into the car to pay for services from the comfort of one’s own car.”
- In February 2017, Jaguar went public with a partnership with Shell to create an application for drivers to pay for fuel on their dashboard screens.
At the same time Oney, banking subsidiary of Banque Auchan, has developed Automatric, a solution that also enables payment for petrol from the comfort of your car, but this solution is car and petrol chain agnostic. The customer is identified through the license plate of the car. Automatric is already live in a number of European markets.
Why is all this relevant from a payment’s perspective? In most of these instances, the actual payment is still being completed on the existing rails especially those from card schemes.
No … the real relevance of the developments in the automotive industry is the role that payment is playing within the process of consumer interaction. Payment is integrated into an end-to-end consumer experience that doesn’t have payment at the core. Payment only plays a minor role. If done in a seamless manner, payment enhances consumer convenience.
As the Internet of Things changes from vision to reality, the growth of online and mobile payments will undoubtedly grow. But because the payment functionality is only part of a wider process, a close interaction between authentication and actual payment is increasingly critical. Being able to securely authenticate the consumer especially if the initiation of the purchasing process is not done through the payment device (mobile or card) will be key. We at Edgar, Dunn & Company refer to this as value exchange; a seamless interaction between identity management / authentication with payment to follow.
Cars, or Servers on Wheels, are only one case study. May be healthcare is next. Whatever it is, authentication will play a far more critical role in the purchasing process in the not too distant future.