Internet of Things (IoT) literally means the “internet of objects”. It refers to the enormous network of objects connected to the internet that are in dialogue with each other. We are talking about vehicles, air conditioning and heating systems, video cameras, household appliances, smartwatches, etc. In short, all those smart devices that have the capability of exchanging data with other connected devices.
And it is precisely thanks to this connection with each other and to the internet, that the devices can offer additional functions, like monitoring energy consumption, remote control, management of specific states of the environment (such as checking the air and activating when dust levels are high), and obviously paving the way for the concept of Smart Home and the Internet of Payments.
Back in 2017, the global smart home market was worth $38.8 billion according to Statista. Since then, however, the industry revenue has doubled and reached $79 billion value in 2020 and is expected to surpass $100 billion in revenue in 2021. Highest portion of revenue each year was attributed to smart appliances ($29.1 billion in 2020) and control & connectivity ($15.6 billion), followed by security and home entertainment ($12.1 and $9.3 billion respectively), while comfort & lighting and energy management are accountable for the smallest portion of revenue in the industry (around $6 billion each in 2020).
The concept of a Smart Home is now well known among most Brits, even more so, the topic is so widely discussed that the overall claimed understanding of the technology remains high, but the consumer excitement has weakened slightly in 2020 compared with 2019. According to the Statista Global Consumer Survey done in 2020, 49% of respondents aged 18-64 owned and/or used smart home devices, mostly smart speakers with a virtual assistant like Amazon Echo (29%), for comfort and lighting like connected lightbulbs (20%) and energy management like temperature sensors and connected thermostats (17%).
However, there are still many barriers to adoption of smart home products according to Gfk (Growth from Knowledge) and techUK, mostly cost, privacy and awareness. In 2020 58% of respondents said that the cost is too high, 53% (+4% from 2019) are concerned about privacy (58%, +9% from 2019 in the smart entertainment category) and 42% are concerned about this technology’s impact on security at home, as well as about the lack of awareness and understanding of how the technology works and what it entails. Factors driving adoption lost a little of its value as well, although not significantly. 50% of respondents (-2% from 2019) are confident to be able to use the technology. For 47% (-1% from 2019) it is really important that the devices at home are synchronised, which is done thanks to IoT and 40% (-2% from 2019) think it will be fun to own smart home products.¹
Obviously, smart devices becoming a commodity has a direct influence on the supply chain in many sectors, due to the processing of huge amounts of data and fast development, apart from the increasing generated revenue on the market. The demands on supply chain will definitely grow, since smart devices already go far beyond entertainment and are going to assume more critical roles, as they partially do already, such as security, energy management etc.
Another challenge is the role of a professional installer. Would they be needed for all types of smart device installation or their role would change or grow irrelevant due to a growing number of self-installing devices? Conversely, the opposite may be true, and the professionals will need to be even more qualified and specialised in data science and machine learning and have diagnostics competences when the sensitive issues such as security and privacy are involved? There are many questions that will need answers shortly, as well as many changes to come that will have huge impact on the supply chain.
Nevertheless, what is certain is that the supply chain infrastructure will need to adapt and receive more investment, become less centralised and focused on repairs and expand to parts supply for multiple devices and tech support. Certainly, the elevated costs and demanding developments are in the near future for the supply chain in the smart home industry.
Nowadays, there are roughly 10 billion IoT devices connected to the internet, and they are expected to reach the 20 billion mark by the end of 2027, and 25 billion by 2030³.
The Internet of Payments is a payment processing via the IoT devices, and thanks to the ever-increasing connection between devices, customers have the possibility to pay using new methods: with their wearable devices (like smart watches), with their cars (e.g., by automatically paying for fuel), through smart speakers (e.g., “Alexa, order a pizza”) and with other methods (e.g. discontinued Amazon Dash Buttons).
With the expansion of the IoT, the retail and Ecommerce worlds will, therefore, need to adjust to the new reality and offer alternative payment methods, as well as an omnichannel buying experience. Thanks to the IoP, customers will have the possibility to begin their customer journey on one device (like a smartphone) and finish it on another (e.g. smart watch or smart speaker), so it will be necessary to create a fluid, uninterrupted buying experience across all of the possible devices a customer may use.
The IoT will also open the door to a recurring payment that will be carried out when specific events take place, such as when a coffee machine runs out of capsules or a printer is short on toner. Consumers will also tend to look for products with voice commands, and this will reduce the time needed for product comparison online, especially regarding prices and brands. Thus, new opportunities arise for Ecommerce, such as the products search through smart speakers and its consequent appearance on dedicated platforms like Google Shopping or similar services.
The In-Thing Purchase is similar to the In-App Purchase. While with the latter we can pay a small amount to unlock an additional service within an app, with the In-Thing Purchase we unlock an additional function directly in the device itself, such as a washing machine or a video camera.
Just think of a smart surveillance camera, which for an additional cost (paid when this extra service is used) makes it possible to send an emergency alert, if doors or windows are tampered with. A premium service that can be activated when needed, perhaps when the owner is not home for a few days and leaves the residence unsupervised (or in any other circumstances based on the premium service of interest). Another example is a vehicle that can unlock more power (horsepower or battery) depending on the conditions. The possible applications thanks to the IoT are potentially infinite.
With so much information shared thanks to the IoT, we cannot rule out the risk that it may fall into the hands of potential hackers. In addition, a significant number of connected devices were not invented with compliance with the PCI DSS (Payment Card Industry Data Security Standard) protocols in mind. And in the world of digital payments it is fundamental for these standards to be adopted by all devices to guarantee the security of the transmitted sensitive data. Fortunately, the IoT world is evolving very rapidly, and these problems will gradually disappear.
Although there are still important developments that need to be made, the world of the Internet of Things is experiencing a significant expansion and will witness a considerable increase in connected devices used by people and will offer even more functions. More and more customers will make purchases through these connected devices, like smart speakers or smart watches, also using voice commands, and this will pave the way for new payment methods and market opportunities like the In-Thing Purchase.
The State of the Connected Home, techUK, Sept. 2018.
Smart home market in the United Kingdom, Statista, 2016.
Transforma Insights, Dec. 2020.
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