PYMNTS’ recent Intelligence of Things Tracker noted that there will 26 billion connected devices in use worldwide by 2020. As much as 85 percent of businesses will deploy Intelligence of Things (IoT) solutions over the next several months.
The seamless integration of devices and payments indicates that unattended payments is poised to take off, which means unlocking new payment experiences across everyday life.
In a podcast with Karen Webster, NMI CEO Vijay Sondhi delved into the ways that IoT is bringing everything — from kitchen appliances to voice-activated speakers to clothing and watches — into an ecosystem where payment providers (sometimes digital, sometimes rendered through cards) act as intermediaries in a process that makes the old new again.
Making Old Experiences Better
For right now at least, Sondhi said, by and large, “we are really just solving problems to do the things that we’ve always done,” but making payments more efficient and speedier at the point of transaction.
By way of illustration, he offered UberPool, which exists as a way — at least, in one use case — to get to the airport. Before Uber, there was the super shuttle, a shared van ride. In that scenario, said Sondhi, someone “manually figured out which part of the city you were going to, and planned and dispatched and figured out where you got pooled.” The shift toward an app that takes care of all that means there is simply a more frictionless method of solving those logistics and payment requirements.
Another use case that is seeing a movement toward unattended payments includes parking, where kiosks and even in-car technology are making the old a bit new, he noted.
In the case of a parking garage that doesn’t have an attendant, said Sondhi, we’ve all gotten used to these horrible, printed-out, cardboard mag stripe cards where we have to insert the cards, and there’s quite a bit of interaction. One model that can improve driving (and even paying tolls) in the IoT age stems from the E-ZPass boxes that line innumerable dashboards.
“If you think about a better experience,” said the executive, “your car could have an NFC chip in it and there are some payment credentials attached to the car.” As one drives through the turnstile, it authenticates the vehicle (or even the driver through biometrics), pre-authorizes for the payment and lets the user just drive out.
Sondi explained, “Maybe you’ll get a printout as you drive out when the gate lifts, or you’ll get it by email. … This is an example of using innovative technology that is not invasive and does not require any hardware upgrades.”
The card form factor has been removed completely, he told Webster, and “we are able to use a surrogate method of authentication.”
He added that rule changes by card giants have also helped give tailwinds to the rise in contactless payments. Sondhi pointed to the fact that Visa and Mastercard have eliminated the “no signature” requirement for transactions below £50 or $100 AUD. This has, for example, helped contactless payments in the U.K. get what Sondhi termed a “turbo boost” — inside five years, contactless penetration has reached double digits across some use cases.
When asked about what “low-hanging fruit” may be ripe for innovation and unattended payments, Sondhi told Webster that NMI has found traction in charitable giving, where the firm has partnered with the City of Bristol and the Children’s Hospital in the U.K. In setting up a series of kiosks around the city, users can tap their cards or smartphones and make a donation to a charity benefitting the hospital.
“This is an example we can bring to the United States,” he said, “where we can have associations and churches have a kiosk, or even offer charitable giving through mobile devices,” providing a tap-and-go donation capability that can replace the literal passing of the collection plate.
The Twin Concerns
In the pursuit of doing old tasks in new ways, and making them better, Sondhi noted the twin concerns of data security in a trade-off with convenience. He said there now exists — especially as unattended retail gains traction — a third leg of consideration: data privacy.
He said his firm has seen varying levels of perspective and concerns over data privacy on a market-by-market basis, citing differences between Europe, Asia and the United States.
“In the U.S.,” he said, “consumers are usually quite OK to trade a bit of privacy for utility.” However, he continued, by and large, data privacy “hasn’t been brought to the forefront. I feel, as [payment] professionals, we need to bring it forward and make sure consumers opt in. We don’t want to be creepy. We should fully disclose what the implications are.”
In terms of security, as reported, the Japanese government has been testing hundreds of millions of devices for security purposes. That type of scrutiny, said Sondhi, may be warranted in the age of connected devices, where a fridge or Nest thermostat are connected to accounts, and where recurring payments may be set up.
“I think it’s fantastic that the government’s getting involved,” said Sondhi, adding that “I would rather have the industry come up with a smart policing type of system, but we haven’t seen that yet.”
Innovators Applying Their Craft
The true value of unattended retail and technology, married in an effort to make commerce easier, said Sondhi, may lie in predictive analytics rendered through artificial intelligence (AI) and machine learning. He noted there are companies working on AI or rules-based systems that can anticipate changes in financial behavior. The day may be near when voice-activated assistants are “telling you in the morning that they put your car insurance out to bid with six different vendors, and found a better price with equal customer satisfaction ratings that can save you $200 a year. … You’re going to see innovation where there is anticipation of your needs before you even know those needs are there.”
For the consumer interacting with voice assistants across Google or Amazon, and with Uber or Lyft, the question becomes where “they can track my behavior” — and amid prompts to get to the airport early amid bad traffic, they can offer a $2 special at whichever airport coffee shop may be the consumer’s favorite.
“These are just massive opportunities for both propensity to purchase and loyalty reinforcement,” said the executive.
In a world where paying for goods and services is on demand, he said, “our payment credentials need to be served up automatically without us even thinking about it. And so, a huge opportunity for us in the payments industry [requires a] set of interoperable standards [as] a way to have payment credentials exchanged across different devices and different contexts. … That’s where we can think [toward] a future where there’s more efficiencies, and lower the cost of doing business to accept payments.”