One of the biggest trends in the payments industry is the rise of the Internet of Things (IoT). In recent years, there’s been a profusion of IoT infrastructure, with billions of IoT devices coming to market around the globe.
These devices collect troves of information and enable a range of helpful payment and logistical capabilities. As these devices become more ubiquitous, understanding what is and what is not an IoT payment becomes more crucial. However, the payments industry has not had a clear definition of what qualifies as an IoT payment. Until now.
“There is a need to better categorize and understand what an IoT payment is so that we can all keep track of the size of IoT payments as this market grows,” said Tim Sloane, VP of Payments Innovation at Mercator Advisory Group. To meet this need, Mercator Advisory Group published a comprehensive report on how the Internet of Things is influencing payments. Central to the report is a comprehensive definition of an IoT payment.
“Mercator Advisory Group classifies IoT payments as a machine-triggered payment based on real-time data analytics,” explained David Nelyubin, a research analyst with Mercator. Mercator situates IoT payments in a broader payments categorization framework that classifies payment types by the amount of human involvement and data collection.
To be classified as an IoT payment, the payment must be fully automated and rely on real-time data analysis. For example, consider a smart printer. The printer senses that ink levels are low, so it makes the decision to order more ink and pay for the order. Since the decision to place the order and make the payment are all automated, this is an IoT payment. In contrast, simply using a smart watch to pay for an in-person order at the grocery store is not an IoT payment under the Mercator framework.
The report also details which industries are being most impacted by IoT payments. “The industries that are affected the most are insurance, agriculture, and utilities,” said Nelyubin. In the future, Mercator believes that the amount of real-time data captured by IoT devices could impact how the industry approaches authentication.
Mercator’s payment categorization framework offers a new way to quantify payments. With more IoT devices entering the market, such a framework will enable industry experts to better grasp the impact and scope of IoT devices in the payments industry.
To learn more about how the Internet of Things is influencing payments and what an IoT payment is, read Mercator Advisory Group’s report IoT Payments: How the Internet of Things Is Influencing Payments.