The pace of change in how we purchase goods and services has never been greater. In the future we probably won’t pay by cash but for instance pay-by-car and pay-by-washing-machine
We are getting closer to living in a fully connected world. In addition to desktop PCs, laptops, tablets and smartphones, an increasing number of our devices are connected to the internet.
This raises new questions for all of us and will change consumer behaviour in relation to purchasing services and products. Retailers must therefore ask themselves what their business can do to fully harness the power of this technology in order to connect with consumers in more meaningful and contextual ways.
What is the significance of having a washing machine which can connect to the internet? Running out of washing powder and having to make a quick dash to the supermarket to buy some more could be a thing of the past. The technology behind the Internet of Things (IoT) will enable our washing machines to automatically detect when the washing powder is running low. By the same sensor, this could be applied to coffee machines, alerting us when they run out of coffee beans or capsules. Cars will automatically detect when a lamp breaks or if other services are required and book itself in to the mechanics. Our fridges will order new milk.
Amazon paves the way with its “Dash Button”
This vision of the future is not all that far away – in fact, it looks likely to become reality within ten years. People already want to spend as little time as possible completing day-to-day chores. So why not respond to this development by using suitable technology? We have seen in the past how ground-breaking technologies can simplify everyday life and satisfy basic needs. Amazon has shown with its ”Dash Button” how such solutions might be structured. This button allows consumers to buy various household items by simply pressing a button on their appliance, without having to log onto the internet.
If this sort of solution is already possible, why not use ‘pay-by-car’ at the petrol station (by pressing a button in the car), ‘pay-by-fridge’ or ‘pay-by-whatever’? In this hectic modern world, we seem to all be constantly on the move. These methods would meet the needs of a generation of busy people by simplifying our lives and allowing us to save precious time. However, such solutions must provide seamless user experiences, including payment processes. Consumers should not even notice that they have to make a payment. This is important, because generally speaking, payment is a necessary evil.
Tokenization will be key to making connected living a reality
But: What if payments are made automatically in the background? What if a sensor of my washing machine breaks and the machine starts to order tons of washing powder of its own accord? And what if I sell my washing machine, but forget to remove my card? Will the machine order washing powder on my card, which is delivered to me instead of the new owner?
It soon becomes clear that leaving connected devices to handle payment processing raises many questions, concerns and challenges. It is up to the payment ecosystem to resolve these. How can security be guaranteed? How do we control what the devices do with our payment credentials? Simply speaking: how can we win and keep the trust of users?
Tokens are more than just a reference number
Major payment companies and card schemes are beginning to address the issue of securely storing card details by providing tokenisation services. We therefore store card numbers in highly secure environments and create tokens. These tokens are just a “reference” stored by providers, on wearables or other devices. This improves tokenization security as the references are of no value to hackers – unlike our card details.
But above and beyond the security aspect, in a world of payments initiated by devices and card numbers (each of which can be tokenized) stored on file, we need to move one step further and look at tokenization as a meaningful solution for cardholders to simplify how they interact with their cards. This is because tokens can be more than just a reference to our card details.
Tokens could be linked to billing agreements which define the rules of token acceptance. A token can have an expiry date, a maximum amount per transaction, a maximum per month, each limited to one merchant and much more besides. Tokens will therefore play a key role in the connected living concept as they can limit purchases by also integrating an effective risk protection solution. At Wirecard, we are already using one-time tokens (virtual cards) in the Orange Cash solution. Those cards are only valid for one merchant, only for one day and only for e-commerce (card-not-present) transaction. One-time cards offer cardholders a high secure way for only purchases. These one-time-tokens can be used in various scenarios like subscriptions, to set a maximum amount per transaction – and to get the control of the washing machine back.
Clearly, this is not a scenario for tomorrow. We already have multiple accounts at service providers in addition to owning and using multiple devices. With the rise of the IoT, the number of devices and service provider accounts we use will explode over the next few years. The IoT will be larger, mobile networks stronger and more extensive, while devices will become smarter and more powerful. Consumers, companies, device manufacturers and mobile operators alike will all have to be ready for what the future holds.