For several years now, we've been hearing about the promise of the Internet of Things (IoT) - a network of connected devices in our homes, in brick-and-mortar retail outlets, and even in our vehicles, that enable brands to build customer relationships through facilitating payments, marketing messages, and even reward and recognition. A recent study by Visa and PYMNTS.com reveals that consumers are ready for this brave new world. But are issuers, payment networks, and retailers ready to give it to them?
By Rick Ferguson
The study by Visa and PYMNTS.com, entitled “How We Will Pay,” found that more than 80 percent of Americans have a strong interest in using connected devices to make purchases, with a keen eye toward security and data concerns. The study was announced at the WIRED Business Conference where Visa is introducing more than a dozen new global partners into its token service provider program to bring payments to new form factors as the Internet of Things (IoT) evolves alongside consumers' growing appetite for all things digital.
As the use of voice-controlled assistants and wearable devices become more commonplace, consumers are citing adoption benefits such as saving time, more frictionless payments, and efficiency with day-to-day tasks. With benefits such as these, it may be no surprise that the number of connected devices has increased to 4.4 devices per person on average.
The study found that 75 percent of consumers have at least one connected device, in addition to their smartphones, computers or tablets. Eighty-three percent recognize those devices as saving time and reducing friction when making purchases - subsequently creating an unattended checkout experience, regardless of device or platform. This seamless purchase experience is of interest to all respondents, with auto-pay at the pump and in-store topping the list at 40 percent.
More key findings from the study:
- Connected device ownership is an increasing trend. The average consumer owns 4.4 connected devices including game consoles (47%), activity trackers (41%), smartwatches (15%), voice-controlled assistants (14%), connected thermostats (9%) and virtual reality headsets (7%).
- Consumers with more connected devices make more purchases. Additionally, connected consumers makes more purchases across more product categories than those with just one connected device, with apparel and footwear leading the way.
- Buying things using a connected device is widespread. In 11 out of 19 product categories ranging from healthcare to accessories to food, 50 percent or more of the consumers studied made online purchases through a device within a week of the study. Top three categories included travel services, household repair and entertainment.
The study also showed that as speed and convenience continue to drive adoption of connected devices, consumers still place high value on trust and security. Importantly, the more connected a consumer is, the greater their concern about their financial safety. When asked, more than 75 percent of respondents cited "data privacy," while 69 percent cited "order verification and accuracy."
Respondents also place a greater trust in banks and networks to enable payment via connected devices. Over 65 percent cited card issuers and bankcard networks as the institutions they trust most to enable those experiences, over retail channels, social networks and mobile device manufacturers.
Money quote on the study from Visa executive vice president Jim McCarthy:
"The category of payment-enabled devices is still in very early days, yet this research shows just how much consumer interest and understanding is starting to build for what these experiences can offer. As we work with our banking partners to make it easier to put payment credentials onto devices, a few new consumer use cases will inevitably break through and start to really change the game."
Still, we may still be a ways off from this utopia of frictionless payments enabled through a global network of connecting devices. In an accompanying analysis of the study, Creditcall CEO Lars Dige Pedersen argues that retailers in particular must overcome some formidable obstacles in order to leverage the IoT future. Money quote:
"Pedersen said the payments and commerce ecosystem isn't ready to support the Internet of Things just yet. The age of the IoT is here, he claimed, but 'it has not yet reached the tipping point.' He believes the IoT's true power will be unlocked when two things happen. First, Pedersen said, connected devices beget connected devices. As more of them enter the market, they will increase each other's value. Second, merchants must connect what Pedersen called "data islands" in order to create a true omnichannel experience that is equally personal, whether guests are shopping online or in stores."
One way to connect those data islands, of course, is through the brand's loyalty program. By attaching a unique loyalty identifier to every customer transaction, whether online or in-store, merchants can capture an omnichannel view of customer behavior. Add in mobile payments, beacon technology, and geolocation, and it's possible to envision a future in which consumers navigate their brand relationships seamlessly between the online and offline worlds. The Visa study tells us that consumers are ready for it; how soon will we be ready to give it to them?
Rick Ferguson is Editor in Chief of the Wise Marketer Group.