The way we pay for things is changing — fast.
According to recent studies, the preferred payment method of global online shoppers are credit cards (42 percent), followed closely by electronic payment (including PayPal if available) at 39 percent. Moreover, digital wallets are forecasted to overtake credit cards globally by 2019.
While the emergence of payment gateways like PayPal and Stripe play a major role, the Internet of Things (IoT is set to fuel the shift beyond the tipping point, making payment gateways the dominant option for consumers worldwide.
A payment gateway is an eCommerce payment service that authorizes payments made by credit card, debit card or bank transfer. Whenever you make an online purchase, you’re using a payment gateway to transact the money from your bank account into the merchant’s bank account.
Popular payment gateways include PayPal, Square and Stripe. But as new IoT devices emerge, consumers are no longer just buying products and services from a laptop or smartphone.
When Visa and the online payment industry news magazine PYMNTS conducted a survey of over 2,500 consumers about their shopping experiences, the results showed both a growing dissatisfaction with the current state of affairs, as well as a desire for new options and innovations.
In fact, 60 percent of respondents found the entire shopping process — both online and in brick-and-mortar stores — to be inefficient, time-consuming and even boring. Nearly two-thirds said that they would use an IoT device to make shopping faster and easier, while more than three out of four said that they wanted their banks and financial institutions to implement new payment methods.
Several top payment processors are getting involved in providing IoT payment gateways, either by partnering with existing technology firms, or by developing their own methods. These efforts will allow users and merchants to process payments through firms that have established reputations as online payment providers, while also letting them take advantage of the growth of IoT technology.
In 2015, the French online payment processor Ingenico announced a partnership with American microprocessor manufacturer Intel to develop secure payment authorization systems to go with Intel's Atom processors. At the Transact 15 event held in San Francisco, Intel showed how the company's IoT solutions allow for smoother transactions on any IoT-enabled device, while also showing how Ingenico's software created a secure connection to transmit the transaction data.
“This is a great example of how innovation can simplify the purchasing experience and further enhance the merchant-consumer relationship," said Philippe Lazare, chairman and CEO, Ingenico Group. “Bringing secure payment into connected devices will root our payment acceptance expertise in the Internet of Things.”
“Intel and Ingenico Group are working to bridge the retail experience and security gap," said Doug Davis, senior vice president and general manager of the Internet of Things Group at Intel, "while also making sure devices are easy to deploy and manage so we don’t create new burdens for the merchants.”
The online payment processor PayPal has been working hard on becoming the leader in the IoT payment gateway space. In February 2016, PayPal launched the beta of its PayPal Commerce platform, a system which would give merchants the capability to insert “Buy” buttons on third-party apps. These buttons would allow users to make instant purchases from any IoT-enabled device, with PayPal acting as the payment gateway.
Aunkur Arya, PayPal's Senior Vice President and Global Head of Product & Engineering, told PC Magazine UK about the issues that the company faces in developing an IoT payment gateway platform.
"The problem we're trying to solve is, there's a fundamental shift happening in how e-commerce is being conducted," said Arya. "Because you have so much engagement in social messaging platforms, the messaging players are trying to become the OS [operating system] now. The experience is starting to shift from the search model to buying something wherever you are on mobile."
Developers for the Pebble smartwatch platform have developed a range of apps that enable users to make payments on the go thanks to an integration with PayPal. Plus, the Pagare smart strap lets users “tap and pay” at retailers who use either Apple Pay or Android Pay. Pebble also announced that they will take part in the Visa Ready program that enables Visa card holders to use the strap to make secure payments.
“We’re thrilled to be one of the first smartwatch makers in the Visa Ready Program,” said Eric Migicovsky, founder and chief executive officer of Pebble, said in a 2016 press release. “More than ever, today’s consumers value products that make their lives easier. Having the ability to make secure payments directly from your wrist is convenient and a great example of how a smartwatch can be helpful in your everyday life.”
Digital assistants, such as Amazon's Alexa, allow users to place orders without the need for a card, a phone, or a watch. All they need is a voice.
Users can place orders with Amazon Prime by speaking to Alexa, without needing to recite their account or credit card information. Furthermore, if the user has their information recorded with other retailers that Alexa supports, users can go ahead and make purchases from those sites, too.
Last but not least is Amazon yet again, but this time, they’re leading the way when it comes to IoT payments changing physical retail outlets.
Amazon Go — the first branch of which is now open in Seattle — allow shoppers to bypass the payment process altogether. Thanks to a few sensors and cameras coupled with machine learning, shoppers just need to have the Amazon Go app installed on their smartphones to walk in, pick up an item and walk out. They don’t even need to unlock their phones, let alone approach a cashier.
A decade ago, the eCommerce industry was booming — and while nothing has changed on that front, the potential of IoT payment gateways could propel online sales to unprecedented heights.
After all, consumers needed to sit in front of a laptop or whip out a mobile device to complete any significant transaction. But now, checking out is nothing but a short voice command away.
Furthermore, wearable payment devices will revolutionize the way consumers shop in bricks-and-mortar stores, removing friction from the payment process and making those impulse buys even snappier.
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