'Internet of Things' expands payment options

By Michael Lloyd

Payment processor MasterCard has predicted that cash will be extinct in the UK in the next 20 years, internet-of-thingsthanks in part to the growing number of devices consumers can use to make payments. The expansion of the Internet of Things (IoT) -- a loose term used to refer to everyday objects that can be connected to online services -- could help speed along those developments. 

Improved mobile connectivity and advances in near-field communication (NFC) technology - the system behind tap-and-go payments -- are already leading to an explosion in the development of IoT devices, many of which can be connected to a user's bank account or credit card, allowing them to pay for goods and services in new ways.

"The Internet of Things has begun to transform the way we shop and pay for in-store goods," Liviu Arsene, senior e-threat analyst for antivirus software company Bitdefender, said in response to emailed questions.  "Payment processors have begun exploring with IoT and contactless technologies for purchases." 

Don't think mobile commerce ends with mobile payment platforms -- the number of ways you'll be able to make purchases in the future is surprising.

Wear your card on your sleeve (or wrist or finger)
Both Apple's and Samsung's mobile payment platforms allow users to pay for things with their respective smartwatch offerings, although the latter's pay service is not yet available in the UK. These products offer a small taste of how consumers will soon be able to make purchases simply by waving an everyday personal item in front of a contactless payment terminal.

A customer pays using a white Kerv ring. The ring also comes in black.   

Visa and UK hardware maker Kerv Wearables have both separately developed smart rings fitted with embedded NFC chips that can be used at points of sale. Similar in nature is Barclaycard's line of bPay products, which includes bracelets, key fobs and stickers. 

Barclaycard is also behind a contactless payment jacket concept design. Developed in partnership with men's clothing firm Lyle & Scott, the jacket allows its wearer to make payments with a flick of the cuff, demonstrating how new payment technology can be embedded in almost anything people wear. 

A customer pays using the Lyle & Scott jacket.   


"In theory, we currently have the technology to add contactless payments into any type of wearable, may it be a smart band, a smart watch, or any type of Bluetooth and NFC enabled device," Arsene said. "To this end, IoT devices could easily become the Internet of Commerce."

Ask and you shall receive -- literally
Amazon, Google and Apple are all betting big on virtual assistant platforms, which allow users to issue voice commands to connected devices. The majority of these platforms have been opened up to developers of third-party devices, meaning shoppers will soon be able to make purchases by simply by speaking instructions into items such as a speaker or TV.

The Amazon Echo, which works with the Alexa virtual assistant.   

For instance, credit card issuer Capital One already allows its customers to check and pay their bills by talking to Amazon's virtual assistant, Alexa, which works with Amazon Echo, a Bluetooth speaker. You can also instruct the speaker to make purchases, whether it's ordering goods or a pizza.

Google is also harnessing voice recognition technology to make physical shopping easier.

"In a limited number of US stores, Google has introduced the ‘I'll pay with Google' system, where shoppers just have to walk up to the cash register and simply say the phrase," Arsene said. "The hands-free system works by simply uploading a picture of the user and a payment method into a designated application and then it connects via Bluetooth and Wi-Fi to the store's cash register to validate the transaction."

Cars, home appliances with payment technologies on the horizon
Tech firms, payment processors and producers of everyday items are working hard to make sure that everybody will soon be able to pay for most things with IoT technology no matter where they are.

Visa is looking to use beacon technology to allow connected cars to assess how much fuel you need at a petrol station and pay for your tank using a linked credit or debit card without you having to walk across the forecourt. Similarly, smart appliances such as Samsung's smart refrigerator (not yet available in the UK) allows you to keep tabs on your supplies and order groceries straight from the kitchen.

Convenient, but secure?
Some commentators have observed that IoT device makers are too focussed on making their products as user friendly as possible, while ignoring important security issues. If you're planning to use a new payment option powered by IoT technology, it's important to be aware of any possible exposure to fraud.

NFC-enabled products do have some security measures in place. They use tokenisation to protect users' banking or credit card details. With tokenisation, when you make a transaction, rather than the same account number being processed each time, each payment uses a unique 16-digit "token" and a cryptogram -- a one-off code generated by an encryption key stored on the handset. Both sets of data are sent to the payment processor, which checks they match before authorising the payment.

There are spending limits on wearables that facilitate NFC-based payments, too. Just as with tap-and-go cards, the devices can only be used to make purchases up to a value of £30 in the UK.

But fraudsters tend to adapt their methods to keep up with technological changes. "From a security standpoint, having a wide range of payment-enabled devices could potentially backfire and open up new vulnerabilities or types of attack," Arsene said. It's too early to tell whether these "smart objects" are vulnerable, so all consumers can do is assume that the proper security measures will be set in place before mass adoption, she said. "However, past experience has shown that any new technology comes with new vulnerabilities."

See related: Biometrics aim to make payments more secure, Calling all payment tech junkies: Emerging innovations gather steam, Technology could boost financial inclusion -- but will it?

Published: 30 June 2016