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A new partnership between Visa and IBM Watson will give the firm’s Big Blue Watson IoT platform clients access to Visa payment services through the card network’s tokenization offerings.
The partnership, which reflects a wider trend of payments moving into the IoT, could give Visa access to as many as 6,000 IoT client companies by allowing them to provision Visa tokenization into their devices, effectively turning those into point-of-sale (POS) terminals that allow users to pay on-the-go.
In practice, this could create a number of new purchasing experiences. For example, a sensor in a user’s car might alert them when the vehicle needs a part, and then allow them to order the part, pay for it, and schedule an appointment for installation through the car’s dashboard, according to USA Today. Or, a pair of smart sneakers might track a user’s running distance and — after a certain number of miles — remind them to buy a new pair, which they could do on-the-spot through a fitness tracker or app.
Demand for connected device payments will likely rise as market availability increases. BI Intelligence expects the number of installed connected devices will hit 22.5 billion by 2021, up from 6.6 billion today. As those devices get more popular, it’s likely users will expect more robust functionality — including payment services — from them. In 2015, despite limited market availability, 19% of consumers were already very interested in connected device payments. By partnering with IBM, Visa will be able to move into this fast-growing space and fulfill this need as the market expands.
That makes the partnership a smart play for Visa for two key reasons:
- It could grow Visa’s volume. Embedding seamless payments is a priority for payments firms. That’s because integrating transaction opportunities into users’ daily lives helps them form habits, and making payments easier increases the frequency of user payments. The IoT partnerships give Visa more touchpoints into consumers’ lives, which could grow purchasing and engagement with Visa. That ultimately strengthens brand loyalty and increases transaction volume, and could grow revenue.
- It keeps Visa competitive. Last year, Mastercard launched a smart refrigerator that allows users to order and pay on a touchscreen, and the firm recently partnered with OnStar for car-affiliated payments as part of its IoT payments initiatives. This isn’t Visa’s first play into the space, but the access IBM provides could help the firm scale quickly and begin to capitalize on the growing market fast as its peers try to do the same.
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.
BI Intelligence, Business Insider’s premium research service, has compiled a detailed report that 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 from the report:
- 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.
To get your copy of this invaluable guide, choose one of these options:
- Subscribe to an All-Access pass to BI Intelligence and gain immediate access to this report and over 100 other expertly researched reports. As an added bonus, you’ll also gain access to all future reports and daily newsletters to ensure you stay ahead of the curve and benefit personally and professionally. >> START A MEMBERSHIP
- Purchase & download the full report from our research store. >> BUY THE REPORT
The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of connected device payments.
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