The Sunday Mail
Jabu Basopo
Imagine a future where machines are capable of conducting commerce with other machines. A world in which every internet-connected device can accept and make payments.
This is no longer the stuff of science-fiction. Today, a vast evolving ecosystem of connected devices is already revolutionising commerce. Known as the Internet of Things (IoT), this expanding universe of interoperable devices is making payments possible in everything from connected cars and wearables to smart homes and cities. And it is heading to Zambia.
IoT payments give us an opportunity to extend payments into an ever-growing array of devices that don’t require the traditional card and terminal. To enable IoT payments a security technology called “tokenisation” is used to replace sensitive account information, such as the 16-digit account number on a debit or credit card, with a unique digital identifier called a token. The token allows payments to be processed without exposing actual account details that could potentially be compromised.
It’s remarkable to consider just how radical payments have transformed over the last 60 years. For decades, credit cards made our lives simpler during face-to-face transactions, in which both the merchant and consumer were in the same location. Payments took a giant leap when it became possible to pay merchants remotely by entering our credit card details over the phone, then on our computers (e-Commerce), and eventually from smart-phones (m-Commerce) that fit in the palm of our hand.
Now, tokenisation has digitised the card, and introduced an extraordinary new era in payment capabilities. Many of us are already making tokenised payments using our mobile wallets. In addition to mobile solutions, other IoT categories will drive tokenised payments, including the Smart Home, and Connected Car.
IoT payments solve consumer pain points
Consider your average trip to the petrol station: you need its location, pick your petrol (or diesel) grade, and swipe your card or pay with cash. With a connected car, we can alleviate those pain points by connecting your car to a digital payment credential (called a “token”), and then have the car find the nearest gas station, and select the petrol grade, so that the only thing left for the petrol attendant to do is pump. Or in a smart city, a connected car can locate an available parking meter. After you park, the car “handshakes” with the parking meter and initiates the meter, and when you drive away from the meter you’re billed for the duration you were parked.
Biometrics will play a vital role as payment solutions continue to evolve
If you’re someone who makes payments with a mobile wallet, you’re already using biometrics every time you use your fingerprint to authenticate your identity.
IoT payments rely on biometrics in a variety of ways. For instance, a connected watch could be bound to both a unique token and your voice, using specific data to authorise payments that only your body can provide. Without that data, all payment transactions are halted. In the near future, you’ll be able to swipe your hand and connect to a cloud-based token without the need for a watch or any other device. In a sense, each of us will eventually be a part of the mesh of the IoT by virtue of our individual physical traits.
Tokenisation fundamental to IoT payments
Tokenisation is the essential component of all IoT payments, but the only constraint in developing IoT payment solutions will be our collective imagination.
Eventually, IoT payment solutions will dramatically transform our concept of what it means to “own” something. Imagine a world in which you could take an appliance out of a store without paying. Instead, you would pay for the device on a per-usage basis. The manufacturer would therefore be incentivised to deliver more value so that you use the appliance more.
The same can occur for cars, televisions, or any other connected device.
As the IoT payments ecosystem continues to evolve and consumers increasingly shop with connected devices, the need for a seamless and secure digital payment experience becomes crucial.
At the Rio 2016 Olympic Games, Visa offered a payment-enabled ring to its Team Visa athletes. As the exclusive payment technology sponsor, Visa is in a unique position to bring cutting-edge payment technologies to every Olympic Games, often trialling technology not yet commercially available. At the PyeongChang 2018 Olympic Winter Games, Visa commercially sold wearable products, such as gloves and lapel pins, enabled to make payments over contact-less payment readers.
For Tokyo 2020, Visa is exploring payment innovations ranging from biometric payment authentication and wearables to new mobile applications which will include digitally-issued cards.
Tokenisation enables frictionless, card-free payments with connected devices, including mobile phones and wearables, which leads to richer customer insights and thereby creating more tailored experiences for consumers. It’s these types of frictionless experiences that make IoT payment solutions so compelling from a consumer perspective.
It’s not that consumers’ needs are changing, but rather that the world’s best technology and applications are meeting them with enhanced convenience and greater security.
Jabu Basopo is general manager of Visa Southern Africa.
