Credit: Shutterstock photoVisa, Inc. (V) is listed among the world's most innovative companies by Boston Consulting Group (#36) and Forbes (#32), partly because of its commitment to innovations in payments technology. Visa recently announced at the World Mobile Congress plans to bring secure payments to the Internet of Things (IoT).
According to the press release, “Visa, Inc. is expanding its Visa Ready program to include Internet of Things (IoT) companies, such as manufacturers of wearables, automobiles, appliances, public transportation services, clothing and almost any other connected device.”
The IoT World
Internet of Things (IoT) is a network of devices (machines, equipment, devices, facilities, vehicles) which are connected to the internet, enabling secure exchange of data and information between this network of physical assets and connected sensors. Although not a new concept, IoT is an arena with huge unexplored potential which companies are looking to capitalize on.
IoT has the potential to improve decision-making and monitoring in businesses, enhance productivity, generate new revenue streams as well as create new business models. A report by Cisco, Inc. estimates that IoT will consist of 50 billion devices connected to the internet by 2020. Another forecast expects 90% of cars to be connected, too. According to a report by Gartner, “More than half of major new business processes and systems will incorporate some element of the Internet of Things (IoT) by 2020.”
A report by McKinsey Global Institute says, “Our bottom-up analysis for the applications we size estimates that the IoT has a total potential economic impact of $3.9 trillion to $11.1 trillion a year by 2025. At the top end, that level of value - including the consumer surplus - would be equivalent to about 11% of the world economy.”
According to survey by World Economic Forum, by 2025, 92.1% believe that 10% of people will wear clothes connected to the internet, 89.2% believe that 1 trillion sensors will be connected to the internet, and 85.5% believe that 10% of reading glasses will be connected to the internet.
Making IoT Payment Ready
Enter Visa. They will be joining the IoT by offering technology companies and device manufacturers a secure and seamless payment system by extending its Visa Ready program. “The Visa Ready Program for Internet of Things now provides IoT device manufacturers with a path to embed secure payments into their connected devices.”
What does this mean for the way we make payments? This means that any IoT enabled device implanted with Visa Ready program system will be able to make payments; the device could be a ‘connected’ watch at a grocery store, a ‘connected’ car paying for gas at the fuel station or a ‘connected’ refrigerator for buying milk. Thus a consumer would be able to initiate payments using any ‘connected’ device using Visa’s payment system. A person driving a ‘connected’ car will be able to pay for multiple transactions like buying gas, a parking ticket, even food without having to leave the car.
The strategic partners in the new Visa Ready program will work with device manufacturers to create such payment transactions while guiding them on the Visa Ready certification process, which will strengthen the implementation of industry standards for digital payments. The IoT companies joining the program will be initially focusing on payments for wearables and automobiles. Companies like Accenture, Coin, Giesecke & Devrient, Fit Pay, and Samsung are among the early Visa Ready partners.
These companies will be collaborating with device manufacturers (also called IoT innovators) to provide them with ‘payment expertise and technical integration’ in order to enable smooth payment processes. The payment system will also involve token requestors through Visa Token Service, “an innovative security technology that allows secure mobile and digital payments anywhere an Internet connection is available.”
“More and more, consumers are relying on smart appliances and connected devices to make their lives easier,” said Jim McCarthy, executive vice president of innovation and strategic partnerships at Visa. “By adding payments to these devices, we are turning virtually any Internet connection into a commerce experience – making secure payments seamless, and ultimately more accessible, to merchants and consumers.”
In October 2015, MasterCard (MA) had launched a similar program to bring MasterCard payments to consumer products such as automobiles, wearables, accessories, consumer gadgets and more. MasterCard’s initiative was an extension of its earlier programs like the MasterCard Digital Enablement Service (MDES) and the Digital Enablement Express (Express), and brought “to fruition the vision that every device will be a commerce device.” In January 2016, MasterCard signed an agreement with Coin to bring MasterCard payments to wearables such as smart watches, fitness brands and other wearable devices.
Final Word
The growing number of smart devices which are linked to the internet is a great opportunity for companies like Visa and MasterCard to make them commerce enabled. Although not all devices on the network would want (or need) a payment function attached to them, this still gives Visa a great opportunity to increase the reach of their payment system which would automatically increase the number of transactions. The technology will provide customers the freedom to pay using the “thing” most convenient to them, in a secured manner. Visa’s debut in the world of Internet of Things sets it against its rival MasterCard yet again.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
