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Internet of Things: from Smart Homes to the Internet of Payments

Internet of Things (IoT) literally means the “internet of objects”. It refers to the enormous network of objects connected to the internet which are capable of dialoguing with each other. We are speaking of vehicles, air conditioning and heating systems, video cameras, household appliances, smart watches, etc., or all of 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 with the internet, that they can offer additional functions, like monitoring energy consumption, remote control, management of specific scenarios (such as checking the air and acting when particle levels are high), and obviously paving the way for the concept of Smart Homes and the Internet of Payments.

Smart Homes are becoming increasingly popular.

The concept of Smart Homes is now well known to many Italians: in 2017, 55% of people had already heard of them and at the end of 2018, this figure rose to 59%. Of this 59%, 69% are people between 36 and 45 years of age. In addition, roughly 41% own at least one smart product (+3% compared to 2017)¹, an evident sign of significant recent advertising: from smart light bulbs to smart speakers (like Google Home and Amazon Echo) and smart voice assistants which simplify the management of multiple smart products present within a home and link them to the IoT world.

But 42% of those who own at least one smart product do not use its additional functions, of which:

  • 41% believe they are not very useful
  • 34% believe they are unnecessary
  • 14% see them as too complex¹

These data show a lack of additional functions that can be perceived by the user as value added. Only 29% of the solutions offered propose an additional service, but they are predominantly basic services like cloud data management. Abroad, there are more advanced examples, such as smart locks and video cameras that recognise the postman and temporarily unlock doors for package delivery when the purchaser is not home (like Amazon Key in the United States). This function could be highly beneficial for Ecommerce.

Although the Italian market is more behind compared to other countries, it marked growth of 52% compared to 2017, from turnover (generated by Italian companies or companies with operating offices in Italy) of € 250 million to 380 million (while Germany, for example, had an increase of 39%, reaching € 1.8 billion and the United Kingdom an increase of 39%, reaching € 1.7 billion)². But the main innovation in recent times has been the launch in Italy of the highly anticipated smart speakers. Although they make up only 16% of the turnover in this market (around € 60 million), they have become a driving element in the Smart Home world in Italy, broken down as follows: 35% in the security realm, 16% smart speakers, 14% household appliances, 12% heating and 23% other applications. After their launch, sales of all smart products for the home increased, from connected household appliances to security devices.

The Smart Home market, online and offline retail growth: +160%

The breakdown of sales channels in the Smart Home realm is evolving in favour of an increasingly plug & play dynamic: the user just needs to connect the device and it works immediately. Although the traditional supply chain (consisting, for example, of professional installers) is still dominant and covers 50% of the Italian market, it has suffered a sharp decline compared to 2017 (from 70% of sales to 50%) and has lost ground to other channels, such as online and offline retail, which have seen total growth of 160% and now cover 40% of the Italian market³.

The reason for this slowdown in the traditional supply chain is precisely its very conservative approach, which has not taken into account the spread of self-installing devices, with the relative evolution of consumer requirements. Indeed, they are increasingly likely to make purchases themselves online or in the store and ask for the help of a professional only if needed later on.

Internet of Payments: development for Ecommerce

Nowadays, there are roughly 7 billion IoT devices connected to the internet, and they are expected to reach the 10 billion mark by the end of 2020, and 21.5 billion by 2025⁴.

The Internet of Payments is included in the IoT, as thanks to this connection between devices, customers will have the possibility to pay with 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 like Amazon’s Dash Buttons.

The Internet of Payments is included in the IoT, as thanks to this connection between devices, customers will have the possibility to pay with new methods: with their wearable devices (like smart watches), with their cars (e.g., by automaticalWith the expansion of the IoT, the retail and Ecommerce worlds will therefore need to adjust and offer alternative payment methods and an omnichannel buying experience. Indeed, customers will have the possibility to begin their customer journey from one device (like a smartphone) and finish it with 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. “Alexa, order a pizza”) and with other methods like Amazon’s Dash Buttons.

The IoT will also open the door to recurring payments that will be made when specific events take place, like when a coffee machine runs out of capsules or a printer is short on toner. Consumers will also be increasingly inclined to seek out products through voice commands, and this will increase the immediacy with which they are compared, especially as regards price and brands. Thus, new opportunities arise for Ecommerce, such as the possibility that products can be searched for through smart speakers and appear on dedicated platforms like Google Shopping or similar services.

In-Thing Purchase: possible development for Ecommerce

An In-Thing Purchase is similar to an In-App Purchase. While with the latter we can pay a small amount to unlock an additional service on an app, with an In-Thing Purchase we unlock an additional function directly from the device itself, such as a washing machine or a video camera.

Just think of a smart surveillance camera which, for an additional cost (which can be paid, for example, when this extra service is used), makes it possible to receive emergency response services 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 home unsupervised (or in other circumstances based on the premium service of interest). The applications that are possible thanks to the IoT are potentially infinite (another example is a vehicle that can unlock more power in terms of horsepower or battery).

The future of the Internet of Things

With so much shared information thanks to the IoT, we cannot rule out the risk that it may fall into the hands of potential hackers. In addition, a good number of connected devices were not created to be compliant with PCI DSS (Payment Card Industry Data Security Standard) protocols, and in a world of digital payments, it is fundamental for these standards to be adopted by all devices to guarantee the security of the sensitive data transmitted. Fortunately, the IoT world is evolving very rapidly, and these problems will gradually disappear.

Although there are still important developments to be made, the world of the Internet of Things is experiencing significant expansion and it will see a considerable increase in connected devices used by people as well as the functions that they can offer. 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.

¹ CATI survey conducted by the Observatory of the Polytechnic University of Milan in collaboration with Doxa, Dec. 2018.

² Statista, 2018.

³ CATI survey conducted by the Observatory of the Polytechnic University of Milan in collaboration with Doxa, Dec. 2018.

⁴ IoT Analytics, 2018

⁵ Series of surveys conducted by the Observatory of the Polytechnic University of Milan in collaboration with Doxa, 2014 (online), 2016 (online), 2017 (CATI) and 2018 (CATI).