Making the Connection: The Internet of Things and Payments

You’ve heard of a smart TV and smart car, but what about a smart fridge or smart coffee machine? A smart city? Yes, they’re all a part of the Internet of Things (IoT). That’s the term used to describe how technology is connecting previously unconnected things—think watches and thermostats—to the Internet, making them accessible and controllable from anywhere, usually from a smartphone.

While consumers are still getting familiar with smart technology and uncovering the possibilities that connected items have for everyday life, IoT innovations in the payments industry are already underway.

Now, physical objects from phones to wearables are embedded with sensors that make them “smart;” in other words, able to communicate, transact—and pay. For example, digital wallets using EMV and NFC payment functionalities enable devices to interact with point-of-sale as well as bank technology. It’s making contactless payments possible, and it’s what’s driving the introduction of smart vending machines and smart kiosks in retail outlets across the consumer marketplace.

Not Just a Trend

The IoT may be a catchy way to discuss what we’ve been talking about for a few years now: cashless, mobile-based payments. But there’s more. Intel Pushes Payments Into the Internet of Things on Pymnts.com points to the development of payment-powered digital signs. And The Internet of Things Will Revolutionize the Payment Industry from Yale Economic Review suggests a few more potential applications of the technology:

• Household utilities (e.g. smart smoke alarms) controlled remotely by smart devices can have embedded chips containing payment information
• Service providers like gyms charge fees based on their members’ use of wireless sensor-yielding machines
• Retail outlets can charge a customer’s sensed device automatically upon picking up an item and walking out with it

Next on the horizon? IoT is expected to enhance companies’ loyalty programs, fueling the technology integrations required for cultivating deeper, more valuable relationships between consumers and their favorite stores.

Impressive Outlook for the IoT in Business

In their report The Internet of Things 2015, which looks at how business strategy is now—and should be—impacted by IoT, Verizon predicts that by 2025, best-in-class organizations that extensively use Internet of Things technologies in their products and operations will be up to 10% more profitable. And by 2020, there will be 5.4 billion B2B IoT connections across the globe.

Noting that the key ingredients of IoT—network connectivity, cloud, security, and infrastructure—have been around for decades, tech leaders are now learning how to put the pieces together and into consumers’ pockets, kitchens, and cars. At the same time, the enhanced technology gives companies better access to data that can be used to improve processes and save costs; provide simpler, more secure service; and more (often without human intervention).

The IoT is surely changing the way people—and our things—interact with the environment and the way we make purchases. For more insights, explore Verizon’s The Internet of Things 2015 and stay tuned to the WEX Corporate Payments blog for news and updates.