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How Will Consumers Pay via the Internet of Things?
IoT feels more like a new use case for existing payment methods than a new segment looking for its own unique payment methods.
—Russ Jones, Glenbrook Partners
convenience that early adopters love. Plus, it’s a good t between Amazon’s technology smarts
and the opportunity to make money now using techniques that are known to work—card on le, default ship-to address, free shipping, expedited delivery, etc.
Where to Next?
So let’s go back to where we started. Does the IoT need its own payment method? Probably not. I think the IoT feels more like a new use case for existing pay- ment methods than a new seg- ment looking for its own unique payment methods.
My gut tells me the IoT is likely to be service- and usage-driven. That smells a lot like the traditional card on le (or token on le) subscription model. I think the payment winners in this new segment will be those that do the best job managing the ins and outs of a recurring billing relationship—managing plans, tracking enabled services, gracefully managing declines, etc. In fact, I wouldn’t be surprised to see some of the existing subscription enablers start to reposition for the IoT. Where we might see some innovation from them is in the ability to meter usage of services.
Russ Jones brings some 30 years
of payment industry analysis to his job at Glenbrook, where he works with clients in all aspects of global payments strategy, including global acceptance, alternative payments, risk management and digital identity. He can be reached at russ@glenbrook.com.
a new payment domain for exist- ing payment methods? This is the key question.
Bitcoin Steps Forward
If you believe new payment methods are needed, bitcoin seems like a good candidate. Some in the bitcoin community believe bitcoin is ideally positioned to meet the require- ments of this new world—largely due to the programmable nature
of bitcoin payments. The payment from one party (the device) to another party (perhaps a service provider) only happens when a pre-prescribed set of conditions becomes true. Bingo. The power of scriptable payments meets the intelligence of connected devices.
The canonical example in all the blogs is the futuristic smart washing machine. Here’s the paraphrased scenario: We know it will have intelligence, and it likely will be connected to the Internet. When installed, the washing machine shops online for its own mainte- nance contract. And when it nds the right contract, it will use bitcoin to lock the service agreement in place and then automatically summon support when needed.
I can see why bitcoin advocates like this use case. But I’m not sure bitcoin is really needed to make this vision work. Why make the smart washing machine of the fu- ture that uses a shopping bot to
nd a service contract even more unlikely by marrying it to bitcoin?
Amazon’s Not Waiting
A good example of how this al- ready is playing out can be found with Amazon, which is all over the IoT opportunity. The retailer has released APIs device manufactur- ers can use to embed ordering functionality into their devices. Productized as the Amazon Dash Replenishment Service (DRS), the company is working with device providers to integrate product replenishment into their Internet- connect devices. Dash is a fob-
like device that enables Amazon customers to reorder packaged goods by pressing a button. At last count, Amazon said it receives approximately 10,000 orders per week via Dash devices.
DRS can be integrated with de- vices in two ways. Device makers either can build a physical button into their hardware to reorder consumables or they can measure consumable usage so reordering happens automatically. For exam- ple, an automatic pet food dis- penser made with built-in sensors can measure the amount of pet food remaining in its container and place an order before running out. Device makers can start using DRS with as few as 10 lines of code.
This makes a ton of sense to me. It provides the gee-whiz
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