The Internet of Things (IoT) has been growing exponentially for the past decade and is expected to double again to 50 billion connected devices by 2020. That is equivalent to more than 6 devices for every person on the planet. However, discussions recently have shifted away from the number of devices to how these smart devices are increasingly disrupting the business value chain.
Recent research suggests that the major growing trend is the Machine to Machine (M2M) market, which is expected to reach $27.62 billion by 2023. These transactions represent a significant trend where humans are no longer in the loop on purchases, but rather simply on the loop. That is, humans are simply being informed after the fact when their devices are making purchases.
The rise of the Internet of Payments (IoP)
This growing shift in the payments landscape is known as the “Internet of Payments” (IoP). The early stages came in the form of payments being enabled through devices like FitPay[1] or Amazon Dash buttons. The latter is a physical button that can be coupled with a specific item on Amazon.com, such as laundry soap. Whenever you press the button, the button sends a purchase request to Amazon and within a day or so; the soap will arrive on your doorstep without any other interaction.
The protocols that govern IoP are still evolving, but when they are coupled with the cloud[2], big data, artificial intelligence[3], and biometrics, they have the potential to become the next hyper-growth sector. Some even envision a future where money and payments will become automated and cease to be a part of our everyday lives[4].
As the payments markets shift, it will be the most nimble and open banks that will reap the benefits. In the initial stages especially, consumers will be wary of giving their fridge their credit card number. Payment providers, such as Visa, PayPal, Alipay, Chase, and Mastercard will need to provide much more detailed transaction data than simply the date and time purchases were made. Consumers that use a single account, a credit card, for example, will want to know which device made the purchase on their behalf and what initiated the purchase.
Many credit card companies have already introduced tokenization to enable devices to make and track purchases. Visa is working to develop a ring that would replace sensitive payment account information with a secure token so that consumers can make payments with a simple tap of the ring.
The ecosystem adjustment
Payment providers will need to go beyond simply processing payments directly through devices, though. Once multiple devices begin making purchases on behalf of individual consumers, payment processors will need to offer more comprehensive management solutions that work with the devices, manage them directly and reporting on their purchases and activity. Device management solutions
