The Internet of Things (IoT) is exploding. This global network of connected devices is expanding at a phenomenal rate, offering huge potential for change in how people live their lives and how businesses operate.
Financial institutions should be paying particularly close attention to the growth of the IoT, which could have significant repercussions in areas like payments.
Consumer use dominates IoT
Research firm Gartner recently published figures showing how consumer use is dominating the IoT at the moment. The consumer segment is set to utilize some 5.2 billion connected devices this year – nearly two-thirds (63 percent) of the total number of applications in use. Businesses are expected to have 3.1 billion connected ‘things’ in operation by the end of this year.
Peter Middleton, research director at Gartner, said: “Aside from automotive systems, the applications that will be most in use by consumers will be smart TVs and digital set-top boxes, while smart electric meters and commercial security cameras will be most in use by businesses.”
Looking at the IoT as a whole, the firm predicted that the number of connected devices in use around the world will rise by 31 percent to 8.4 billion this year. Ongoing growth is set to increase that figure more than twofold to 20.4 billion by 2020.
For businesses, one of the most noteworthy predictions is that total spending on IoT endpoints and services will reach almost $2 trillion this year.
What does this mean for payments?
It’s clear that consumers are becoming more and more comfortable using all sorts of IoT devices – from the digital box above their TV to the smartwatch on their wrist. When it comes to personal finances, there will be growing expectations for people to be able to make payments and manage their money via an expanding range of connected objects.
Some recent announcements from Visa have underlined just how important the IoT will be for the payments industry. The company has launched a partnership with IBM to realize the potential of IoT devices for commerce. This could be a major step along the route to making all connected objects a possible point of sale.
At Mobile World Congress in Barcelona, Visa announced its first Everywhere Initiative in Europe, which aims to unearth the ‘next big thing’ in payments. The program includes a competition challenging five fintech start-ups to show how payments could be brought to the IoT. One of the participating firms, Switzerland’s Biowatch, enables NFC payment authentication using vein-pattern technology incorporated into a Bluetooth-enabled watch.
In a contribution to NFC World’s recent What’s New in Payments report, Meysam Moradpour, director of digital ventures at Pizza Hut, looked at how the IoT could become the ‘Internet of Commerce’. He noted that payments functionality is being incorporated into every connected device available to consumers.
“As this occurs, increased emphasis is being placed on the overall commerce experience of the customer, with a noted drive toward frictionless and seamless transactions,” he added. “The rapid expansion of IoT offers companies an opportunity to expand beyond mobile phones, cards and point-of-sale devices, to a broad and diverse ecosystem of internet-connected devices.”
With consumer expectations for maximum connectivity and convenience only set to increase, one of the key challenges for financial institutions and payment firms going forward will be balancing these priorities with other imperatives like security and reliability.