The rapid expansion of the Internet of Things (IoT) offers payments companies an opportunity to expand beyond mobile phones, cards, and point-of-sale devices, to a broad and diverse ecosystem of internet-connected devices.
We forecast that there will be 24 billion connected devices installed globally by 2020, up from nearly 7 billion today. And over 5 billion will be consumer connected devices by 2020, representing a massive expansion of touchpoints that could eventually offer payments functionality.
A recent report from BI Intelligence dives into the budding industry of connected device payments, providing a rundown of the stakeholders driving innovation in wearables, connected cars, and connected home devices. It also gauges the impact of new payment devices on different payments companies, along with how these devices could shift consumer purchasing behavior.
Here are some of the key takeaways:
- The Internet of Things is ushering in a new era for payments companies and manufacturers. The rapid expansion of the Internet of Things (IoT) offers an opportunity to facilitate payments beyond mobile phones, cards, and point-of-sale terminals, on a broad and diverse ecosystem of internet-connected devices.
- More transactions could eventually pass through connected devices than smartphones. We estimate there will be 24 billion of these devices by 2020, with 5 billion of them being consumer-facing. This represents a massive expansion of touchpoints where payments could be enabled.
- Card networks have developed a basic framework to enable commerce in everyday devices. Visa and MasterCard are creating the underlying infrastructure to support the standardization of payments integration and stake themselves out as the key connected payments gatekeepers. Their payment platforms are universal, allowing digital payments to grow without being tied to the success of a particular manufacturer.
- Consumer-facing IoT companies have much to gain from enabling payments in their devices, including improving the value of the device, being able to cross-sell products through the device, and laying the groundwork for future opportunities to earn incremental revenue. For payments companies, connected payments offer a new revenue stream and an opportunity to gain market share ahead of competitors.
- Wearables, connected cars, and smart home devices will be the top connected payments product categories.
In full, the report:
- Frames the opportunity for embedding commerce capabilities in new devices.
- Explains how a device becomes commerce-enabled.
- Discusses the potential for payment-enabled wearables, connected cars, and smart home devices.
- Examines the impact of connected payments on key stakeholders.
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