The ‘Internet of Things’ is the Game-Changing Next Step for Telcos… But What Are They Missing?
As I travel to meet new telcos and attend an array of trade shows around the globe, one discussion that comes up again and again is how the telco industry can gear up for the world of IoT. And it’s not just a topic that telcos are “a bit” interested in – the sector believes that IoT will drive the fourth industrial revolution, likening it in importance to the discovery of steam power.
As revenues continue to decline in telcos’ traditional core business – calls, data and roaming fees – it is understandable that IoT is being hailed as a natural progression for the telco industry, which is undoubtedly well-positioned to take advantage of the sizable growth opportunity.
So exactly how big is this IoT opportunity?
The numbers seem to change with each new report published, but I’ve picked up on a couple of figures that I think put the opportunity into perspective. One is that each household will have a minimum of 20 connected devices talking to networks by 2020, and that every square mile will have 600 million devices sending small bursts of information. Research from Edgar, Dunn & Company estimates that the number of IoT devices in use by consumers (e.g. wearables, smart home appliances and connected cars) will rise from 4 billion in 2016 to 13.5 billion in 2020 – a threefold rise in only four years!
We can see the early signs of this growing trend, with vending machines re-ordering stock automatically, engineers being sent to failing air con units before they actually fail and the sharp rise in voice-activated connected devices in the average family home. All these things are merely the forerunners for things to come (notwithstanding the constant hype and media coverage around driverless cars).
But what are telcos doing to jump on this opportunity – and what are the challenges they face?
The IoT market is currently viewed in terms of four main pillars:
- Spectrum (the bandwidth to deliver IoT)
- Payments infrastructure
- Fraud and security
From my experience in working with large telcos, it seems that the industry is just focusing on spectrum and commoditization – in other words, how telcos can physically enable IoT technology. Ensuring that the IoT devices operate using low bandwidth transmitters is a critical consideration, as is ensuring that the telco systems themselves have the vast bandwidth needed to carry billions of additional communications per day. With the huge challenges to address in their bid to commercialize the IoT opportunity, it’s understandable that this commands much of the attention of telcos.
The problem is, that in the face of the challenge in addressing these first two pillars, most telcos have not yet progressed to looking at how they will take payments or how they will secure these payments against fraud and risk. Nor are they looking at the impact that the immense volume of transactions might have on their payments infrastructure.
While the list of potential IoT devices is almost endless, all these devices will be communicating via an embedded eSIM i-Sim – and will likely pass on multiple transactions per day. Telcos looking to support IoT services need to ensure they select a payments gateway that supports any type of device and any method of communication, and can support mass volume transactions without disruption to the user experience. Beyond that, it will also be critical to factor in considerations such as availability of a range of payment methods, to ensure mass appeal and consumer convenience.
Of course, it is also vital to ensure that all payments made via IoT devices are secure; fraud should be screened in real-time to minimize risk, delivering a seamless experience and supporting sustained customer adoption.
Payment authorization shouldn’t be overlooked
Lastly – and arguably most importantly – telcos need to make sure the payments solution they put in place can push final confirmation of an IoT purchase back to the consumer, before payment is taken.
Imagine, for example, your smart fridge automatically orders a replacement pack of beer every time you take four out. ”Brilliant!” you might be thinking. In theory, this sounds great, but in reality, there is too much room for error, with consumers easily losing control of both their fridge contents and their money. The best approach is to have a final point of authorization for each payment. This can easily be done in a fast and convenient way that doesn’t disrupt the experience for the customer – a simple SMS or biometric authorization method can work as a final, but important checkpoint in the process, helping to prevent disputes and disgruntled (and potentially inebriated) customers.
With the payments and fraud elements of the IoT forming such a critical part of the path to profitability, telcos will benefit from working with expert partners that can provide a robust, cloud-based platform with ready access to a range of geographies and payment methods, along with pricing packages that are specifically geared for IoT – reflecting of the very specific nature of these transactions.
ACI has a wealth of experience working with telcos around the world and offers a specific IoT service that delivers against the ‘must-haves.’ If you would like to learn more, please contact Chris Curd or visit aciworldwide.com/telco.
Related Blog Posts
Nordic’s P27 Powers Ahead with Cross-Border Payments
P27 continues its accelerated journey to cross-border payments in the Nordic region, with an ambitious project scope and timeline. For banks, processors et al, this poses questions of prioritization. Payments players must identify their most pressing business needs, and what can be achieved with their current stack.
2020: The Year of (Near) Cashless Transactions?
Happy belated New Year and raise your hand if you make and/or follow New Year’s resolutions. I used to and then realized they were exercises in futility. But, over this past holiday, I thought I’d give the resolution game one more shot. This one was more a realistic goal than it was a resolution, but who can really tell the difference anyway!?! I decided to go cashless over the holidays, which can still be somewhat challenging for many in the US (though my friends in other countries are probably ridiculing me right now). I was traveling (to NYC and Florida) and wanted to pack as little as possible (in both my luggage and my wallet). I’m all about loyalty card points these days, hence the 2 back-to-back trips.
How India is Tackling the Challenges of Digital Payments Growth
India’s massive transformation from a cash-based society to a cashless society is underscored by the rise in fintech adoption and the growth of the Unified Payments Interface (UPI) platform, which is now processing more than one billion transactions each month.
Three Merchant Payment Trends to Watch in 2020
In 2019, merchants everywhere were challenged by pressure from new entrants, the continued breakdown of traditional industry boundaries and growing customer preference for a digitally-led or digitally-influenced purchasing experience.
The Invisibility Cloak of Payments: What Are the Consequences?
If you could pick any superpower, what would you pick? Children often pick "invisibility.” Oh, the possibilities of being invisible! What fun! You can walk into a candy store and take all the candy you want, you can stay downstairs late with your parents and listen to what they’re saying, you can sneak out without anybody noticing… But when you think about it, there are also disadvantages that come with this superpower.
What’s Next for Nordic Payments? P27 and the Rise of Real-Time and Cross-Border
The Nordic region has long been considered a pioneer of digital payments, with some of the lowest cash usage levels in Europe; however, the impact on cross-border payments has been limited when compared to progress on the domestic front. And this is a crucial area to address for a region with large volumes of trade and tourism between neighbors, as evidenced by the fact that 18,000 Swedish workers commute to Denmark on a daily basis. Not surprisingly, improving the cross-border payments experience and efficiency is a high priority.
Looking Back at Money20/20 USA: Where Do We Go From Here?
Now that the dust has settled on another successful Money20/20 USA in Las Vegas, it allows for a moment of reflection on what some of the announcements and trends mean for the ever-changing financial industry. Discussions spanned a variety of topics, including the future of international and digital expansion of PSPs, how organizations developing cryptocurrency wallets plan to enter the payments space, and how challenger banks plan to revolutionize the banking experience. Inclusivity was a recurring theme throughout – and nowhere was this more evident than in the Rise Up program.
Digital Overlay Services Unlock the Value of Real-Time Payments
The global payments industry continues to drive toward true real-time, with the potential opportunity for corporate banking often cited as the most lucrative.
2020 Fraud Predictions: What to Expect Across the Globe as Cybercrime Evolves
As we near the end of 2019, our payment experts have begun to take stock of the trends over the last year, and make their predictions for where they see the industry heading in 2020.
I sat down with our own fraud experts, Marc Trepanier, principal fraud consultant for North America, and Giselle Lindley, principal fraud consultant for APAC, to get their thoughts on what we can expect in the year ahead around payments fraud.