Payments

Why connected device payments haven’t reached mass adoption

  • Banks are moving slowly on banking with connected devices, with Capital One taking an early lead.
  • Perfecting the end-to-end customer experience, including biometric authentication methods, is holding up a mass rollout of the technology.
Why connected device payments haven’t reached mass adoption

Visa’s announcement of 13 new token service providers last week was a big step towards a future where internet-connected devices — be it a car, a refrigerator, or Amazon Alexa device — will let banking just “happen” rather than require cumbersome active steps on the part of the customer.

Through Visa’s token service provider program, it will be possible to pay for things with connected devices.

“These new forms of payment are also creating a secure, frictionless, and personalized payment experience for consumers, which provides banks and financial institutions the ability to increase and improve customer engagement,” said Michael Orlando, CEO of FitPay and COO of NXT-ID, one of Visa’s token service providers that works with wearables companies.

The growth of internet-connected devices is expected to transform the customer experience — according to research from Ericsson, around 28 billion connected devices are forecast by 2021, of which close to 16 billion will be related to the Internet of Things. But despite the inroads made among payment providers like Visa, Mastercard, banks are adopting a ‘wait-and-see’ approach.

One bank that’s taken an early lead on internet-connected devices is Capital One, which released the Capital One skill for Alexa last October. On the payment provider side, American Express launched the Amex Skill for Amazon Alexa last month. Capital One’s Alexa skill lets customers to link their bank account through their Capital One username and password and use voice commands to pay bills and get information about their spending habits.

“A first for the industry, this tool gives Capital One customers a convenient, voice-based experience to interact with their credit card, bank, auto and home loan accounts through any of their Alexa-enabled devices, such as Amazon Echo or Dot,” said Ken Dodelin, vice president of digital product management at Capital One. “Future advancements in machine learning and predictive analytics will unlock opportunities for Capital One to help our customers with their financial lives in more proactive ways.”

Others are not saying much publicly. Last year, Citi reportedly tested using Bluetooth-enabled beacon technology to give customers access to their ATMs through smartphones and the ability to send customers location-based personalized offers.

Banks still are in the early stages of rolling out technologies that enable banking through internet-connected devices as they become more comfortable with use cases, analysts say. Among the uses for connected devices in banking, Aite Group Senior Analyst Thad Peterson said payments is advancing the most quickly.

“You’re going to be able to embed payment capability in every one of your devices at home that’s keeping track of things — it could be your thermostat or perhaps your trash,” he said. “For example, if your thermostat goes off for 15 minutes, you’ll be charged for 15 minutes of energy, and that charge will automatically happen without you having to do a thing; it’s an invisible payment.”

Banks are still watching and learning on payments through connected devices, although payment providers like Visa, Mastercard, American Express are making a big push, he said. “Banks are behind them, they’re doing research and haven’t gotten aggressive yet because the use case isn’t clear.”

Other factors, including perfecting the end-to-end customer experience, including biometric authentication for connected devices, are also holding up a mass bank rollout, according to one company that works on biometric security for major banks.

“If you look at the top to top four banks, everyone is doing some kind of biometric rollout or pilot, but when you talk to some of the small to medium-sized institutions, they’re nowhere near and they want to see big players doing it first,” said George Avistov, CEO of Hypr.

The focus for wearables right now, says Javelin Strategy director of omnichannel services Mark Schwanhausser, is in using them to receive rather than deliver information from the financial institution.

“When I look at wearables and IoT, I see it as more of a way to deliver rather than receive — a watch is more valuable to banks right now as a way to tell the customer something that’s happening about their account,” he said. “The priority is how do you beam material to the customer in a safe, effective and timely manner.”

 

Payments, Podcasts

Brex’s Henrique Dubugras on launching a business cash account and payments trends in 2020

  • Brex recently launched a cash management account for young, growing companies.
  • The firm's co-founder joins the podcast to talk about what where he sees the wind blowing in 2020 and beyond.
Zack Miller | December 11, 2019
Payments

Visa partners with MFS Africa to expand digital payments across the continent

  • While Africa has high levels of mobile wallet adoption, it's not really connected to the global payments ecosystem.
  • Through a deal with MFS Africa, Visa is helping connect 180 million mobile wallets to digital payments.
Zoe Murphy | December 11, 2019
Payments

What’s behind software companies becoming payment companies?

  • Software companies are increasingly getting deeper into payments.
  • This increases revenues and expands their total addressable markets.
Zack Miller | December 03, 2019
Payments

Western Union selects AWS as preferred cloud provider

  • The 168 year old financial services firm is making moves for the future.
  • It's turning to AWS to build cloud-native applications and service Amazon shoppers in local currencies.
Zoe Murphy | November 19, 2019
Payments

A new leg of growth: Brex launches first co-branded card with Bank of the West

  • Bank of the West startup customers can apply and receive for a co-branded credit card.
  • This is the first time Brex has launched a co-branded card.
Zoe Murphy | November 06, 2019
More Articles