November 11, 2016
Connected commerce — How IoT is transforming payments
By: Paul Thomas

I think it’s fair to say the past ten years has seen a greater level of innovation in the way we pay for goods than the previous 1000. But this is only the start. Thanks to unprecedented connectivity between people, places and things – otherwise known as the Internet of Things (IoT) – the rate of change is only going to increase.

BY 2020 there will be more than 50 billion connected devices in use around the world enabling the creation and adoption of new, faster, more relevant and easier methods of payment tied to new commercial models and contextualised relationships with consumers.

We’re already seeing completely new and disruptive payment models come to market at an astonishing rate. Commerce today is more connected and more digital than it has ever been.

New ways of paying

Connected commerce manifests itself in a number of ways, however the key foundation in making any solution or product successful is enabling a slick, frictionless payment experience.   Enabling emerging payment capabilities to create and facilitate financial transactions in the IOT world.  

Many of you, for example, will already be used to paying through mobile wallet applications such as Apple Pay, Android Pay or Samsung Pay.    And for those of you in London, paying for your daily commute via your Oyster or bank card is now taken for granted.  Smart devices are also bringing new levels of convenience to payments through automation. Anyone who uses Uber knows the joy of not having to stop by an ATM on the way home to pay the driver – it’s all facilitated by the app.

Amazon Echo has taken payments automation to a new level, enabling users to order products easily and quickly using simple voice commands…that story is really just beginning in the UK and with Google Home being released this month the sophistication will increase exponentially – there is nothing like a little competition to get things moving.

And then there’s blockchain. One of the most talked about technologies in the past few years, and one that truly divides people, it promises to revolutionise the payments landscape. The technology is being used to create new forms of payments, remittances, money movement as well as non-Fiat currency, otherwise known as cryptocurrency (like Bitcoin)

So what does the future hold for connected commerce? Two things are certain: first, the use of and applications for connected commerce are going to grow exponentially. Second, there is going to be a balance between IoT-enabled payments systems emerging from the retail sector and systems emerging from the banking and finance sector. Combined, they are going to make for a very interesting payments ecosystem

The future of payments in retail

Let’s look at retail first. Over the next few years we’re going to see faster, more efficient, seamless, convenient and contextualised payments emerge in the retail space. Connected commerce solutions are going to redefine how retailers attract consumers into their stores and help them along that all important journey to making a purchase.

Connected devices in-store will enable the physical shop to interact with the online experience; for example; based on analysis of a shopper’s past purchases and behaviours, in-store beacons can alert the shopper via his/her smartphone to offers and promotions that will interest them most. Simple click-to-buy functionality then makes it easier than ever for the shopper to complete the purchase.

The retailer of the future will therefore enable contextualised m-commerce solutions combining payments, loyalty, analytics and IOT to enrich the consumer experience and increase customer loyalty and basket value.

But this is just the beginning. When it comes to connected commerce the sky really is the limit. Imagine, for example, an augmented reality optical display unit that overlays product information – including price, promotions, specs etc. – onto the real world. Arrows could direct the consumers to those items which predictive analytics has revealed he/she would appreciate. Information relevant to the consumer overlays the product, such as calorie count and/or additives.  If they want to purchase it, they’d do so through a voice command or simply placing it in their basket.  Upon leaving the store all payments, loyalty, offers and rewards are all automatically calculated and processed with minimum fuss leaving the customer satisfied with the experience and the retail employee free to interact with customers on the shop floor.

The future of payments in banking

When it comes to the banking and finance sector, the potential of connected commerce is equally fascinating. For a start, operational costs will be drastically reduced.  Blockchain alone is predicted to reduce banks’ infrastructure costs by $20Bn annually by 2022, according to Santander Innoventures. Security will also be improved, helping banks secure their customers’ payments data and other sensitive information. For example, a block chain transaction ledger database is built on an encrypted, permissioned network, making it very difficult to hack.

But there is truly transformational potential too. Many global banks are exploring the use of blockchain and distributed ledgers for domestic and cross-border payments allowing settlement in seconds, expanded access to global corridors, real-time confirmation of transfers and competitive FX rates. In fact, Accenture’s strategic alliance with Ripple, the leading global distributed payments provider, does exactly this. We believe transforming payments is critical for the traditional financial world as well as emerging IoT use cases where smart devices initiate payments requiring real-time, transparent and efficient clearing & settlement.

So connected commerce is already with us and over the next few years it’s going to become more embedded in our lives and the banking systems that support us. The result will be new levels of convenience and connectivity that will place the end user at the heart of a revolutionised faster payments ecosystem.

In my next article I will delve deeper into blockchain and share some thoughts about what the future holds for this technology.

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