Frictionless payment in the Internet of Things era: Visa and IBM
It took Visa 50 years to reach three billion plastic credit cards globally. A great business model for the 1960s but one that is impossible to scale in 2017. So Visa announced a partnership with IBM in Munich on February 16, 2017 to enable any device to carry payment credentials and perform financial transactions.
Your car pays for you, the gas pump takes your coffee order
Take your car. It will work like this: before you arrive at a gas station, your car wirelessly reaches out to a pump to get pre-authorization for the amount of gas you need to fill up. It also signals to the pump which grade of gas you want. All you have to do is drive up and pump the gas. Imagine that while you’re filling your tank the pump asks you if you want a coffee with one cream and two sugars. You do and you say so. When you’re finished filling up, you walk into the store and your paid for coffee is waiting for you. You grab it and go.
Transact anywhere, any time
The Internet of Things (IoT) will allow all sorts of devices to be connected to the internet and the IBM/Visa announcement will allow for these devices to be payment enabled. It means that the point of sale can be anywhere.
With a plastic credit card, to have a transaction you need a terminal and a wired phone line. With mobile connectivity and connected devices, you’ll be able to transact anything, anywhere, anytime. The partnership will work on embedding payment processing in both hardware and software.
It’s frustrating to find a parking space in a big city. Imagine that in a few years, it’s your car, not you, that is working to find a parking spot. When one is open close to where you’re going, the car reserves it and pays for it, so you just park and get out of your car. It’s fast and simple.
Experts estimate that there will be 380 million connected cars by 2021 and a staggering 20 to 50 billion devices (depending on which analyst’s numbers you believe).
Enabling new business models
This will also allow for new business models. Imagine you need to buy a washing machine. But instead of paying $1,000 for it you agree to buy it on a per use basis: paying $2.50 a load of laundry and guaranteeing at least 100 uses per year. And if you use it more you will just pay on a per use basis.
Jim McCarthy, Visa’s Global Head of Innovation and Strategic Partnerships, was wearing a payment ring that Visa uses to transact. Already many payment enabled devices use biometric data for authentication and security. For instance, with Apple Pay you need your fingerprint to log into your smartphone to authenticate. Other devices currently look for the pattern of your heartbeat to authenticate you.
McCarthy cited the example of Amazon Go, a trial store in Seattle for Amazon employees. When you walk into the store, your smartphone handshakes with the store. Using a series of technologies – computer vision, artificial intelligence and others – the store tracks what you take and you walk out of the store. The payment just happens. This technologies have existed since 2010 but it is just now being put together to allow this seamless, integrated customer experience. This is the early stage of where retail is going.
Take a look at the video below to see Jim McCarthy’s discussion in full:
Jim Harris writes, consults and speaks on disruptive innovation. His last book, Blindsided, is a #1 international bestseller published in 80 countries worldwide. He speaks at 40 conferences a year around the world on disruptive innovation and works with executive teams. You can follow him on Twitter or email him.