A new deal between two global giants is set to push the Internet of Things (IoT) to new heights as payments are hooked up to billions of everyday devices.
The alliance of IBM’s Watson Internet of Things (IoT) Platform and Visa’s network means businesses can introduce secure payment quickly to any device connected to the IoT - making cars, appliances and watches a potential point of sale.
“The IoT is not only driving a more connected world, it’s changing the way we live, shop and pay, by moving data and the point-of-sale to wherever the consumer wants it to be,” said Rob Walls, Visa Inc’s head of product for Australia, New Zealand & South Pacific.
“Working with Watson IoT is a major step in getting us to a place where we can deliver secure payments to 'virtually anywhere' on the enormous scale of the IoT," he said, adding that IBM had 6000 customers worldwide ranging from component manufacturers to transit operators and health insurers.
“So, the conversation we are having now is how do we combine the power of the Watson platform and the tokenisation service that Visa offers and embed those together so IBM can facilitate the rapid deployment of payment for those downstream clients.”
Queried on forecasts for the impact of IoT impact on card companies, Walls replied that it would be premature to estimate growth figures. "It’s really all about reducing cash usage and displacing other forms of payments.”
“As more and more consumer devices become enabled for payment - which is what the IoT story is all about - we will see the continued fall away of cash in the economy and the increased simplicity of payments for end users," he said.
“Any cash transaction is invisible to a bank. The more connections we have, the more consumer data we obtain which we can use in a contextual way.”
For example, Visa is talking to wearable device manufacturers globally on how to make fitness device smarter. Devices can track mileage and heart pace but the question for the card company is how to upgrade those programs so they can be used for payment.
“How to make use of the data that comes from the device to tell you it’s time to buy new sneakers and place the order or enable insurers to offer a tailored product,” said Walls.
'Big new wave'
According to San Francisco-based Paul Brody - EY’s Global Innovation Leader, Blockchain Technology - although IoT has been the new cool thing for a while, a few recent events are reshaping the market and what were ideas just a year ago are now opportunities.
“Automating procurement and procurement by machines may be a big new wave. I think big spend will still be mediated by people but smaller transactions will increasingly be automated," he said.
“Those small transactions will generate small fees, but in huge volumes, so it could amount to a very big stream of revenue – and one that existing banking systems are not well equipped to handle,” said Brody, who used to run IoT for IBM.
Fundamentally, the Silicon Valley operative argued, people have realised it is now actually cheaper to make all the devices smart than leave them dumb.
Now that’s happened, he went on to say, the cost of making devices smart has come down and the understanding of how to build something of value has gone up enormously.
“And, after years of fumbling around people are figuring out what the value proposition for IoT looks like," Brody said. From where he sits, the fumbling came from the misguided idea that if people made all devices smart, they would reap enormous value.
“Despite all the talk about smart cities, sometimes it wasn’t worth it and now people are looking at one individual business case at a time - one device at a time.”
The question for businesses is what value will they get from making devices smart? There may be no financial gain from a cooking appliance even if it can download recipes. On the other hand, the connecting of devices is showing definite financial returns for health insurers.
To Brody, smart appliances are not interesting; he predicted we will see the most innovation from shareable assets like cars, second homes, power tools and lawnmowers - anything that has a high capital cost.
“Sharable assets will become enormously important and the opportunity for banks is to connect the shareable assets and put them into a real-time market places," he said.
“Today the market place is dominated by market place outfits like Airbnb and others but I foresee in the future many more blockchain-mediated marketplaces that don’t have big intermediaries."
What Brody is saying jibes with Walls’s comments. The Visa executive said the whole idea of smart energy devices like refrigerators are still in play. But assets like cars will remain front and center of IoT since people use their cars every day.
“Experts estimate there will be 380 million connected cars operating by 2021 and nearly every manufacturer is working to enable their cars for payments - upgrading the car so it can talk to the internet.”
By connecting the car ecosystem to the Watson IoT Platform, a driver would be alerted when the car’s warranty or certification is about to expire or if specific car parts need replacing.
With this information, the driver can order parts with the push of a button, or schedule a service appointment with a garage and pay for gas through a direct interaction between the car and the gas pump.
“The range of other options is virtually limitless," said Walls.