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IREU Top500 The Customer Report: 2018

IREU Top500 The Customer Report: 2018

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GUEST COMMENT Payments – the key to unlocking connected homes potential

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Connected homes: making them work lies in getting payments right
Connected homes: making them work lies in getting payments right
BD Goel, Chief Strategic Innovation Officer, Paysafe Group
BD Goel, Chief Strategic Innovation Officer, Paysafe Group

In a move clearly ahead of its time for 1998, a Japanese company called V-Sync announced that it was releasing an internet-connected fridge. Now, the idea of an internet-enabled fridge has become something of a cliché, but its founding concept still appeals to consumers.

 

This so-called replenishment automation remains one of the key components behind today’s connected home. From security systems to automated lighting – home devices are the most consumer-friendly offering to come from the Internet of Things (IoT).

 

More people than ever are kitting out their homes so they are controlled and optimised digitally, using a variety of apps and web-based dashboards. Crucially, this new technology relies on payments – the commercial fabric which ties these services together.

 

Being part of the trend

Connected homes are going to continue to grow as a very big business. Already, 24% of UK homes now contain a smart home device of some sort, and IHS has predicted that more than 300 million WiFi-enabled smart home devices will be shipped in 2020.

According to most analysts, it’s the convenience and time-saving factors that are going to be worth serious money to consumers; with predictions of what the connected home market will be worth by 2022 ranging from $53bn to more than $121bn.

 

We can already see manufacturers doing what they can to build products which are easy-to-use and save time. Amazon’s Dash buttons let consumers order specific items with one click e.g. ordering coffee pods automatically when pushing the Dash button stuck to a coffee machine. The core technology behind Dash is now being built right into some appliances, so that when a consumer’s washing machine runs low on detergent it will automatically order more.

 

Where there are voice commands – there are payments. Voice assistants are a key part of the connected home trend. According to a Capgemini’s Conversational Commerce 2017 survey, nearly one third of voice assistant users have used their speakers or smart assistants such as Siri and Cortana to make purchases. These payments were for takeaways, groceries, peer-to-peer (P2P) money transfers and car services such as Uber.

 

Consumer challenges

A fridge-triggered milk purchase, a voice-activated Uber ride – each time a commercial connected home transaction happens a payment takes place behind the scenes. Some of these opportunities may be recurring ones; subscription services and utilities payments, in particular, are potentially fertile ground. These transactions all have clear potential for the payments industry.

 

Inevitably, there are challenges. One of which is getting consumers to pay for something that they already get for free. Subscription-based home monitoring and energy management offerings, for example, have the potential to bring a source of connected home revenues. However, consumers are used to handling this themselves, so finding a point where they will pay for services like this is difficult. Parking space location apps are a great example of this – the biggest challenge for providers is that customers won’t pay as they’d rather spend more time looking for a space themselves than pay for the service.

 

There are clear opportunities for connected devices to become a new channel for digital payments, but it can be hard to identify where these opportunities fall. Digital smart meters which can trigger bill payments are a given, but what about those with business cases that aren’t so clear?

 

Earlier this year at CES, the annual consumer electronics show held in Las Vegas, vendors demonstrated Amazon’s Alexa technology integrated within household staples such as showers and toilets. Although this brings great accessibility for those who are unable to easily turn on a tap or push a lever, it’s hard to visualise this as a major source of revenue.

 

From household to the road

Cars, which are already highly connected in their own right, bring great prospects for payment opportunities. Imagine fuel payments being taken automatically at the pump, with no interaction required between the driver and a human or machine. Or voice-activated access to third-party apps, where drivers or passengers can speak to order and pay for fast food on the road, then collect it en route to a destination. The list of opportunities feels endless.

 

Keeping the options open

Consumers like options, so the need for choice is critical with these emerging platforms. Having an appliance automatically and transparently collecting payments in the background seems great on the face of it, but consumers don’t like to be limited. Vendor lock-in to one system means missing out on better offers or payment methods, and subscription models bring more issues. What happens if a consumer was to miss a payment? Or fall out with a supplier? The supplier has the ability to cut a customer off at their discretion.

 

To combat these issues, vendors and platform developers must take an open and inclusive approach to payments. Global payments trends apply to smart homes too, and the top payment pick in Canada may not be favoured in China, however well the technology performs. Connected homes have immense potential, but only if people can actually pay for the services they enable. To get it right, vendors and developers need to work with payments specialists with the technical knowhow and market insight to help them build globally attractive products and solutions.

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