The internet of things and smart payments
Of all the changes experienced in financial services in the twenty-first century, none has larger potential to fundamentally shift business and consumption models than the Internet of Things (IoT). The core opportunity that the new digital economy will offer to banks is the massive wave of new data about consumers and businesses generated by IoT devices. Banks and other stakeholders will have unprecedented visibility into their customers’ habits and needs. By leveraging these insights, banks can offer their customers more personalised services and better identify cross-service customer needs (e.g. in loans and financing).
Improved data analysis will also help financial institutions reduce inefficient processes and detect fraud patterns more proactively. Data analysis and automation are also key in enabling smart payments, which leverage smart data to enable autonomous payments to be initiated in real time without manual intervention. To take advantage of these data opportunities, banks will need to invest in IT and business process rejuvenation to be able to efficiently handle the massive amounts of new data. While there are still challenges ahead, banks have the opportunity now, and they have already begun the transformation with the move to PSD2/Open Banking and instant payments, to ready their systems for IoT and the new digital economy.
This report examines the development of the Internet of Things and assesses how payment services need to evolve in an IoT world. It looks at the technologies and industries driving the development of IoT today and explores how payment services can become smart payments by utilising IoT. The report outlines a set of principles driving IoT development, principles essential for adapting payment services to IoT, and principles for IoT payment services. It concludes by examining key issues that the financial services industry (together with other industries leading the charge on IoT) will need to explore collaboratively in order to ensure that smart payments are fit for purpose in an IoT ecosystem.