Digital Wallets, IoT and Payments: creating the next level of convenience

23.05.2022

In the past, leaving home without your physical wallet could cause serious disruptions to your day. Without access to bank cards or cash, you might have to borrow money from a colleague to pay for lunch or a subway ticket. These days, however, it’s possible to use public transport, buy coffee, load the parking meter, or purchase movie tickets without ever taking out your wallet and plastic bank card. Consumers are able to carry and access their digital wallet in their preferred smart device and select their payment instrument of choice depending on situation and context.

How is this possible? Through what we call “smart, connected payments and digital wallets". Essentially, these digital wallets can be made accessible via different form factors, such as smart phones, wearables, but also connected cars or smart speakers.

While the concept is constantly evolving along with technological developments, at the most fundamental level, smart connected payments enable digital payment transactions using everyday objects that are linked to the internet.

This trend toward easy, fast and convenient payments was accelerated by the pandemic, during which $5 trillion in annual global retail sales shifted from offline to online forms. As this trend continues and service providers create more IoT-ready devices, it will become increasingly important that new form factors offer high security, consumer and payment data protection while enabling a frictionless payment experience.

What do connected payment devices and digital wallets look like today?

Nearly one in five people in Europeand the U.S. wore a smart watch or used some type of internet-connected accessory on a daily basis in 2020. Add in other types of smart assistant devices, such as speakers, apps and the global prevalence of smart phones, and it quickly becomes apparent that smart connected devices have the potential to become a dominant way to pay.

connected payments
connected payments
connected payments

A growing number of card issuers are also piloting and rolling out biometric sensor payment cards. These cards enable convenient, well-secured, high-value transactions at the point-of-sale. Consumers have already realised the convenience of making payments with eWallets, apps, Near-Field Communication (NFC), and biometric sensor cards, giving them confidence in the technology.

Newer ways to pay are also becoming possible. The number of payment-enabled smart home devices will exceed 2.7 billion in 2025 according to Juniper Research. Cars represent another opportunity for a digital wallet on four wheels and it won’t be long before connected commerce is realised. Soon, we expect people will be able to pay for fuel or order grocery deliveries using their vehicle to conduct the transactions.

Elsewhere, Smart TVs could one day enable viewers to pause an episode to purchase the sweater worn by the actor onscreen with a single click of the remote control. Furthermore, there is huge potential of digital wallet and payments in virtual and augmented reality. Consumers will want to securely access their digital identity via connected devices such as smart glasses and perform frictionless payments of virtual goods on the go.

Getty Image
Getty Image
Getty Image
How secure are payments via smart connected devices?

A future where consumers can purchase physical goods or services via smart speakers, smart TVs, cars or even smart glasses, relies on providing best-in-class customer experiences, while still adhering to the highest standards for payments processing and data security.

Clearly, it’s not practical to ask customers to enter a PIN when buying virtual goods via smart glasses or services via connected cars. Instead, biometric technology could enable strong security and convenience at the same time. The type of biometric authentication will depend on the type of device it secures.

For many types of devices, biometric authentication based on voice, facial, iris or fingerprint biometrics adds another layer of protection for sensitive applications and payment information. Smart connected devices should contain dedicated EMV®-certified Secure Elements or chips that serve as the foundation for security and as an anchor of trust.

Dedicated biometric security measures sit on top of this foundation, enabling smooth and secured payments. Hardware-based turnkey solutions play an important role here forthese devices adhere to globally recognised security standards. Security measures for application processors and microprocessors handling the connectivity must also be enhanced.

Creating a full ecosystem that brings device manufacturers, service providers and chip suppliers closer together will be critical for addressing IoT security vulnerabilities and successful rollouts. This service enablement, such as tokenization of sensitive payment credentials, won´t be limited to just smartphone and wearable devices, but must include TVs, cars, and any other devices used to conduct digital transactions in the future.

Rapid NFC payment tokenization video

In this video, we show how easy payment tokenization for wearables and fashion accessories works with NFC smartphones. By using Infineon technology (SECORA™ Pay W SPA 2.1 or SECORA™ Connect S USON8-7), you can easily turn a stylish, wearable key fob, wristband, or necklace into a secured payment device just by tapping a smart-phone

The world of smart connected payments

Regardless of the forms they take, payments via digital wallets, smart connected devices and IoT have the power to significantly shape commerce—and, in return, to be shaped by consumer demand.

As people seek to gain more control of their private data and demand more transparency in transactions, connected payments and digital wallet providers must continue to address issues of fragmentation, connectivity, and complexity.

Smart Connected Payment
Smart Connected Payment
Smart Connected Payment

Users will expect their new payment devices to work reliably and inexpensively no matter when or where they’re being used. And most of all, they will expect them to be well-secured.

In response, device manufacturers will need to find new ways to expand offerings that are sustainable, profitable, and – most importantly—deserving of the trust placed in them for every transaction.

Thomas Michalski
Thomas Michalski
Thomas Michalski

Author: Thomas Michalski, Director Application and Product Management, Payment, at Infineon Technologies