Last editedApr 20232 min read
The technology behind payments is constantly evolving, from the very first use of currency coins in around 600BC to the advent of electronic money transfers in the late 19th century, all the way through to the rise of online payment methods following the birth of the internet.
In recent years, connected devices (i.e., devices that can have an internet connection, like watches, refrigerators, and cars) have become commonplace. Inevitably, these types of connected devices now sit right at the bleeding edge of payments technology. Not only is it possible to complete transactions via wearables and smartwatches, but autonomous transactions that might appear closer to science fiction than fact, like ordering and paying for food automatically via your refrigerator, are now very much a reality for consumers. These payments – which are encompassed under the umbrella term of “smart payments” – are changing the way we transact forever.
Read on for our guide to smart payments and smart payment systems.
What are smart payments?
Internet of Things (IoT) devices enable machine-triggered payments through the use of real-time data, allowing consumers to make payments (and merchants to receive payments) without any human intervention. Smart payments, therefore, can be defined as transactions via IoT devices that exhibit some level of autonomous behaviour derived from the data that the device collects.
This “autonomy” is a crucial element of smart payment systems. For example, when a customer receives a notification from their refrigerator stating that they’re running out of milk, prompting them to make a purchase, it wouldn’t be considered a smart payment. However, if the customer’s smart refrigerator gauges (via a barcode or RFID system) that the customer’s milk is running low and automatically initiates a payment transaction, it would be considered a smart payment.
While the technology to support smart payments already exists, transactions still generally need to be triggered by humans. However, as the awareness around smart payment systems grows and customer trust in the security of their payment data increases, we can expect to see much more widespread adoption of genuinely autonomous smart payment systems.
Understanding how smart payments work
There are many different examples of devices that may be integrated into the smart payment ecosystem, including refrigerators, cars, household appliances, wearables, smart watches, and so on.
A great example of how smart payment systems work in practice is exhibited by Amazon Go’s Just Walk Out. Providing a frictionless checkout experience, customers are required to simply scan the app when they enter the store. Then, they grab what they need from the shelves, put the items in their basket (without scanning each individual item), and walk out. There’s no need to check out, and payment is handled automatically. Already live in a range of locations, this is a great example of smart payment systems at work in the real world.
The future of payments and GoCardless
Payment trends – from cryptocurrency going mainstream to growing consumer interest in credit-based schemes like buy now, pay later (BNPL) – are always in flux, responding to changes in technology or regulation. As a result, it can be difficult to plot a line for the future of the payments industry. Judging by smart payments, the future of cashless transactions is likely to be smooth, invisible, and frictionless, and while GoCardless doesn’t necessarily deal with smart payments, our payments solution does facilitate smooth, seamless payments by enabling businesses to collect payment directly from their customers’ bank accounts.
This reduces the amount of time that businesses need to spend on manual payment tasks, while also allowing organizations to cut back on the manual overheads associated with recovery and reconciliation that eat into profit margins. On the customer side, much like smart payments, there’s no need to worry about the physical process of completing a transaction, because it’s all handled automatically via bank debit and open banking technology.
We can help
GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.