How Integration of Digital Payments In IoT Could Automate Business Functions

Sheik Mohideen

Senior Vice President – SMB & Partnerships, Worldline

In India, with its unmatched digital payments ecosystem, settling day-to-day financial transactions from the convenience of a mobile wallet is hardly news anymore. However, imagine a future where your customers can authorize payment for fuel from their vehicle's navigation system, pay for groceries using a smart refrigerator or renew gym memberships through the fitness tracker on their wrists.

If this appears like a science-fiction script, then IoT-enabled digital payments or internet of payments have much in store for you. It uses a combination of data analytics, connectivity, and digital payment infrastructure to automate business functions. With the country decisively outpacing the world in fintech adoption, it won't be a surprise if soon, your customers are no longer required to reach for their cards or phones or even consciously initiate the payment for purchases across the subcontinent.

Unlocking a horizon of economic possibilities for New India

The financial sector in India, in particular, the digital payments space, is on the cusp of a perceivable change. In this demographically young, tech-savvy, and aspirational nation, you are likely to agree that payment experiences that are secured and invisible are being increasingly sought after at the moment. Understandably, in April this year, UPI clocked its highest ever transaction volume of 5.58 billion, amounting to ₹ 9.83 trillion, amply illustrating that the typical Indian customer is no longer shy of going digital with the spending.

Powering the behavioral shift is an affirmative regulatory posturing, robust foundation laying initiatives like India Stack, and a conducive domestic climate that continuously fosters innovations around advanced data analytics, customer-focused artificial intelligence (AI), and cloud-based digital architectures. Now, with IoT poised to be added to this already impressive technology mix, it is only a matter of time before the face of digital payments in India is transformed further in unforeseen ways.

IoT: Reimagining the digital payments experience

From networked enterprise environments, factories, and public infrastructure to homes, it won't be an overstatement to proclaim that today, IoT forms the basis of the connected existence for institutions and individuals alike. Statista predicts that the global installed base of IoT devices will reach 30 billion units by 2025. Much of it is in India, where the IoT market size is slated to reach $9 billion within the next three years. The disruptive experiences of the recent past and the consequential need for touchless transactions and more resilient business processes have only fueled IoT proliferation in India.

The intersection of this unprecedented rise in on-field device density, growing business process automation, and maturing digital payments landscape today gives Indian merchants and services providers a unique advantage. Analyzing the data streams in real-time, sensing requirements, and providing what your customers desire the most: simple and automated execution of payments, it is now feasible to construct whenever & wherever shopping journeys.

Automating need-defined financial transactions

IoT-enabled digital payments deepen the abstraction of payment as such, allowing your customers to use any internet-connected object to transact financially, successfully addressing the issue of revenue loss due to cart abandonment, which can be as high as 70-75% for some industries in India. These are machine-triggered, machine-to-machine (M2M) interactions where the customers are notified once their smart devices make the purchases. As the average Indian consumer gets more comfortable with the idea of paying online and acclimatizes to living a digitally integrated and data-defined existence, IoT-enabled digital payments or payment of things is the next level construct to make them spend almost intuitively while delivering the streamlined and continuous user experience that is highly incentivized in the today's closely contested markets.

But apart from getting your customers to loosen the purse strings, the marriage of digital payments with IoT promises other well-balanced and unmistakable dividends, making it a win-win proposition for you and your customers. For instance, with the internet of payments, your customers can realize shorter transaction time and minimum involvement, which is well suited for a young and impatient Indian target audience ready to pay a premium for instant gratification. On the other hand, Big Data and AI algorithms underlying the IoT-enabled digital payment allow you to effectively analyze user behavior, personalize offerings and price them accordingly. It also paces up the financial translation cycles, significantly improving the cash position of your business.

Internet of payments: Accelerating business functions across sectors

However, the integration of IoT with digital payments in India makes it nothing if not more agile. Using custom IoT development can successfully deliver ubiquitous and highly contextual payment experience across a series of landscapes, resolving persisting issues in this country. Given that digital payments in India are set to account for 71.7% of the total payments volume by 2025 and the robust growth of IoT installations across both enterprise and residential environments, it is safe to assume that soon we will be witnessing IoT-enabled digital payment use cases as diverse as:

Smart cities: As a flagship project of the Government of India, the Smart Cities Mission targets to create urban settings that are connected, enabled, and conducive to the growth of individuals and institutions. But will they be suffering from the same inadequacies that otherwise bother the conventional cities in India? For instance, the research found that, on average, only 37% of the assessed urban Property Tax is collected, taking a toll on the exchequer.

Much of it is associated with complex payment processes leading to delays and, often, evasion. The problem is not unique to India, as recent research found that consumers across 100 cities worldwide spend about 32 hours a year handling convoluted payments systems. Adding a sensor plus payment options to IoT objects, allowing service consumers to pay wherever and whenever they like, can solve this and several other frustrating inefficiencies around payment for public transportation and utilities.

Smart homes: Statista observes that the prospects for the smart home market in India have gone up exponentially. It is projected to assume a size of $8.39 billion by 2026, backed by the strong affinity of the customers to invest in connected and smart domestic devices. If you are a B2C service provider, IoT-enabled digital payments open a new horizon of push business opportunities for you. The smart appliances automatically send out repair or maintenance calls into your systems, prompting your customers to confirm the appointments and auto-billing their account once the service ticket is closed. In the process, complacency, delays, and second-guessing are effectively taken out of the equation, helping you to retain your service base comfortably.

Retail: While online retail is already a $70 billion industry in the country, the internet of payments goes a step ahead, creating unattended retail as a future-ready business sub-vertical. It allows your customers to reach an unattended retail location or pickup point, grab their order and have their accounts debited automatically. The cost-effectiveness of such retail operations is not hard to foresee! A case in point is Amazon's new cashless, cashier-less stores, embedded with its Just Walk Out technology. Operating with an array of cameras and IoT sensors, it permits customers to purchase off the shelf and automatically charge upon their way out. The model has been assessed to bring 50% more revenue than conventional retail setups. As footfall nears pre-COVID levels across retail locations in India, the sector seems rife for such transformational changes in buyer experience.

Security: A key concern

However, challenges persist alongside the opportunities that the convergence of IoT with digital payments promises. A Businesswire study confirms that at 42%, vulnerability to fraud remains the single biggest concern for Indian consumers transacting digitally. Data privacy worries trail as a close second. With many devices not built for PCI compliance, the proliferation of IoT devices will only expand the attack surface, making customers further apprehensive.

Here clearly defined norms for authenticating transactions and fixing accountability in case of breaches is essential to establish the stakeholder trust and confidence needed for India's thriving internet of payments ecosystem. For this, the idea has been taken up enthusiastically by India’s leading digital payments partners like Worldline, investing resolutely in tokenisation programs for making IoT-based digital payments safe, reliable, and efficient for you and your customers.

The final note

For the world's sixth-largest economy with a vibrant digital core and equally strong demographics, the internet of payment as a catalyst for business function automation is an idea whose time has come. Despite the teething problems and uncertainties, its benefits for businesses, irrespective of size and their customers, are not speculative. Backed by affirmative policy thrusts, right adoption sentiments, and security best practices, the IoT-enabled digital payments can be one of the pillars underscoring the economic threshold that India is destined to attain.

This article was published in SME World July 2022 issue

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