In time, every device will be smart and connected which will create new opportunities, and of course new risks especially around access control and privacy.
Devices from thermostats to your clothing will communicate using Bluetooth Low Energy (BLE), WiFi, and new low power networking technologies. For larger devices such as kiosks, parking gates, POS devices, elevators, TVs and digital signage, it really isn’t a question whether these devices will be on the network and available; it’s a question of when and how these individual devices will be connected into larger networks that deliver value. If you doubt these devices will be smarter and securely available over networks in the next 10 years, then you should probably stop reading now. If this appears as inevitable to you as it does to me, then we should consider what’s possible and where the opportunities are for the payment industry.
Assuming we share this vision of the future, the next logical questions are How, Who and Why these devices will be integrated together to deliver an entirely new consumer experience. Many today would argue that the likely candidates are Cisco, Google, Microsoft, Apple, and a handful of others that appear to have the edge today based on the internet technology and web services they currently deliver – indeed Google has clearly indicated it intends to take full advantage of the Internet of Things. These companies clearly have the technical chops to invest in and profit from the Internet of Things, but Mercator believes that payments can an equally, if not more compelling, organizing factor if payment companies plan and execute effectively. Payments providers can achieve this goal by recognizing that they can leverage tokens across multiple merchants to deliver an immersive experience while also providing the consumer increased privacy and confidence.
Connecting everything for a specific purpose takes money and will require significant coordination between the entities that control all of the connected devices that surround us. At a small scale, we might wonder how all the smart thermostats will be organized to establish a smarter power grid. The power utilities don’t own the thermostats or have direct access to them; that connectivity will come from Google that spent $3.2 billion to control the devices. So a business case must be made that will incent the power utilities to work with Google, assuming the utilities wish to have access to the information generated by, or perhaps even control, thermostats (or hot water heaters, stoves, refrigerators, etc.). This is an interesting business opportunity and can deliver compelling benefits to the consumer and to the power utilities but it’s a far cry from delivering an immersive consumer experience and consumers may be concerned that Google will sell information they may consider private to companies they don’t trust or approve of. While selling thermostat settings to the power grid may be considered harmless, selling that data to HVAC companies or bill collectors (to determine when the individual is home) may be more concerning.
Delivering an immersive experience will require connecting all of the smart devices that surround a cardholder at a given moment, at work, play, and of course at home in a way that the consumer trusts. Here is an example:
A cardholder is driving to a concert and listening to the artist’s music that’s supplied by the mobile payment app. When she arrives at the venue parking lot the gates automatically open. The cardholder enters the concert without showing a ticket or removing her card and orders and receives a meal without any visible payment and even receives a considerable discount. Once seated the mobile app provides a streaming video live from backstage as the artists prepares to come out.
After a great show she and her friends exit through a kiosk that takes snapshots of them with the band on stage as a backdrop. The picture is sent to all of the participants phones (or uploaded to their Facebook page if they wish). A tap of the phone dispenses a tee shirt to commemorate the event in her size.
Before you say this scenario is far retched, consider the immersive environment American Express delivered at the US Open tennis tournament in a closed loop environment (all devices and services were established for this one event). Fans were registered and given a RFID-enabled wristband that identified the user within the US Open American Express Fan Experience 20,000 square foot environment. Within this space, fans could experience a Professional Swing Analysis to improve their game, the Rally Cam which captures their best tennis shots from nearly every angle in a shareable 180° video file, and an augmented reality Pro Cam specifically for card members enabling them to pose with a hologram of professional tennis player Sloane Stephens. All of these captured experiences are automatically delivered to the consumers email. Combined with this participants were given access to International Tennis Hall of Fame memorabilia through a digital and interactive historical archive of tennis fashion and racquets and access to American Express Radio Live at the Open, which delivers live play-by-play commentary and match updates from ESPN2 (delivered not through mobile, but delivered via radio earpieces available on a first come, first served basis).
All aspects of this American Express experience could have been delivered through a smartphone app combined with Beacons (BLE) for identifying the user at a distance and NFC for identifying the user with a tap of the mobile phone – including the live streaming. With knowledge of the user identity, time and location using a unique shared token, the smartphone application could deliver all of the same services implemented with the RFID-enabled wristband and the radio receiver. More importantly the services could be paid for by the consumer without sharing any consumer data that might be considered confidential. So using currently available technology this concept can be expanded from a closed-loop implementation to an open loop implementation.
Imagine the cardholder notifies the payment network that they want to purchase a US Open experience. The cardholders smartphone app (that is WiFi, BLE, and NFC enabled) is provided a unique token, the structure of which is recognized by all service delivery participants. The token is broadcast when interrogated by a Beacon located at the service delivery locations. Assuming the payment network has the right partners with the right services/kiosks, and the right connectivity, then the entire experience can be deployed from the central location of the payments network and no roped off area is required.
The registered consumer with the mobile app and token would be recognized as they approach the swing machine kiosk (using BLE Location & Navigation profile) and welcomed with a notice as to how long the wait will be before they may enter the machine. Once in the swing machine the kiosk would automatically start,measure the consumers swing, take pictures, and forward the pictures to theorganizing institution who would forward them to the cardholder or the cardholdersFacebook page, whichever the consumer prefers.
Again, with the right partners, the right services/kiosks,and the right connectivity, a unique experience is available to the cardholdereveryplace they go as long as the smart devices and business partners have apresence. The challenge of course is to developthe business model that properly incents all the potential business partners toinvest and participate in creating the environment.
Such participation is likely to initially be driven bybusiness groups that own major venues that are already attempting to create an experience within their own closed loop environment. These operators have already shown interestin working with payment networks to reduce lines at fast food and merchandisesales locations.
For example, it might begin with a relatively simpleextension to existing initiatives such as that by the MinnesotaTwins and the CincinnatiReds. The Twins have created amobile app that enables the audience to play a game on their mobile phone duringthe actual game. The app also has theability to provide seat upgrades and enables check-in at the park. The Cincinnati Reds have enabled BLE in TheConnect Zone which provides more than 25 screens of tweets, Instagram photosand Facebook posts, among other media. The stadium also has BLE installed sothat fans with iPhones or Bluetooth Smart capability can get special offers,ballpark information and other data based on their specific location in theballpark. Utilizing BLE and NFC asappropriate new consumer experiences and new revenue streams can be generatedin-park. Then the opportunity is to tiethe experience to partners near the park, including restaurants, buses, taxis,parking lots, and anything else that takes a payment.
So the primary assets that payment networks can utilize tocreate this new business opportunity includes:
Consumers already trust that payment networksmaintain their privacy.
A wide range of businesses already havesignificant and well-established trusted business relationship, across multipledepartments (consumer card acceptance, loyalty programs, commercial payments,etc) with existing payment networks, which provides a solid base for expansion.
Payment networks deliver expanded cardholderservices today, including insurance programs, concierge services, specialevents and discount programs. Many ofthese offer the possibility of being expanded to leverage Beacon and tokentechnologies.
Payment networks have a separate network that ishighly secure, highly reliable, trusted and already integrated into the vastmajority of merchants and service providers.
Payment networks move money. Moving money from consumer accounts to theparticipants that control the various devices surrounding the consumer will be akey factor in establishing alignment between entities that might otherwiseconsider each other a competitor.
It is unclear if payment networks will pick up on thisopportunity in that historically they have not been willing to expand outsideof payments. For example, in the earlydays of the internet it became crystal clear that the environment hadsignificant risk associated with hacking and a lack of trust in new onlinebusinesses.
Market research analystspredicted that this represented an opportunity for banking institutions to stepin as a organizing factor to protect consumers network and systems and act asthe keeper of trusted web sites. Howeverfinancial institutions instead simply built higher walls and forced consumersinto the hands of other businesses to solve the problem. It was clear financial institutions were nolonger in a position to capitalize on this opportunity when internet service providersbegan to offer free virus protection and firewall services to theirconsumers. Of course if you study the five advantages that give paymentnetworks, the advantage in delivering these services, it is possible to rankindividual networks and financial institutions for each.
Some have already created deep businessexpertise in coordinating payments, loyalty, and brand relationships withmerchants, while others have not or perhaps even established a moreantagonistic relationship. It will beinteresting to see if payments providers will be willing to execute againstthis opportunity to expand into an adjacent market or again sit on thesidelines and watch others take the lead. Of course there is a third, more middle of the road, option. Payment providers may simply decide to be theenabler for others.
The rumor that Visawas working with Apple would be a great example of this. Visa could help Apple broaden thecapabilities of the Apple iBeacon technology and simply continue to be atraditional payments provider while Apple becomes the organizing factor for theimmersive consumer experience. Thiswould suggest that Visa missed a much larger opportunity – but basing such aconclusion on a mere rumor is inappropriate. We will need to wait and see what develops!