How the Internet of Things Will Disrupt the World of Payments

The Fintech Forecast is a series of guest articles published each month from thought leaders at ACI Worldwide. 

Author: Elise Thrale

Last month, thousands of technophiles gathered in Las Vegas for CES, a huge global tech showcase of breakthrough innovations. Amongst all the new technology was a wireless television, urine smart health tracker for your toilet, a foldable treadmill and many other innovations that will change consumers’ day-to-day. The overarching trend over the last few years from the show has been smart home technology. But what impact will that have on the world of payments?

Introducing the IoT

What is the IoT? It is the digital network of ‘things’ connected to the internet, continuously sharing data with each other to create an action. It will have ground-breaking consequences on the world around us, and it has already begun making an impact, namely through smart home technology.

These ‘things’ can be everyday household objects including kitchen appliances, such as a fridge or an oven, car dashboards, smart speakers, washing machines and dryers. These devices link the physical world with the digital world by gathering data from the real-world around them to create an action, including making digital payments on our behalf. Unlike a QR code payment, this will not require any human interaction. This is the beauty of the Internet of Things (IoT) – the devices will be doing all the talking.

How is the wonderful world of IoT made possible?

As of 2021, half of the world’s population owned a smartphone. It is predicted that by 2030, there will be 5 billion people using smart phones. It is exactly this ubiquity of connected devices and internet connectivity that is making IoT possible. To see how this is affecting the world of payments, we only have to look at data by ACI Worldwide and Global Data, which states that 52.7% of the global population use a mobile wallet. This, coupled with the move to the cloud and machine learning, is allowing businesses to scale up and gather insights more easily, with natural language processing. Not only is IoT smart and affordable, but it is able to appeal to humans.

By leveraging emerging machine learning technology, IoT devices can meet the unique needs of consumers. Imagine a world in which you can pay bills using your car dashboard, where your fridge can track finished food and add it to your weekly order, or where you can automatically make an e-commerce purchase on your Google Home or Amazon Alexa smart speaker. Machine learning will enable devices learn the needs of their humans and act accordingly.

Your smart home future, made secure

The IoT has huge economic potential and is expected to generate $13 trillion in revenue in the next couple of years, but this possibility will only be unlocked with trust from consumers. Consumers are sceptical of sharing their data, inviting microphones into their homes, and having a broad digital footprint. Not only do consumers need to trust device manufacturers, financial institutions and merchants should have the right tools in place for verifying customer identity and mitigating payments fraud. This means having the right technology such as tokenization and machine learning in place to monitor high-risk transactions.

Making the most of hyperconnectivity

Greater demand for IoT devices will not only benefit consumers, but also encourage a greater demand for goods and services from merchants and process more payments through networks for banks and financial institutions. Ordering a pizza through your smart speaker at home is just the beginning. Hyper-personalisation and automation is key for creating positive customer experiences and encouraging seamless spending. Queuing and cashiers, or even entering card details will become a thing of the past.