Wednesday, August 16, 2017

From the wallet to the refrigerator: why in the future machines will pay for everything

Experts point out that a multitude of Internet-connected devices will begin to take care of small daily transactions

by Andrés Krom from LA NACIÓN (The NATION, Argentina) 

About 8,000 years ago, the first farmers began to use part of their crops as exchange goods. For practical reasons, people later leaned more towards precious metals, which were not only easier to divide up, but also to carry. Paper money began to be used during the eleventh century, one of the many inventions attributed to medieval China.

Over the last 50 years, the state of available means of payment—cash, checks, credit cards—remained relatively stable. However, the proliferation of Internet access, the rapid adoption of mobile phones, and the emergence of new technologies have opened a window to a radically different future in many aspects, including economically.

So, if we were to travel a few years ahead in time, what kind of means of payment would we see from the slightly tarnished window of our DeLorean?

Probably none.

Invisible future

Unless you are in the habit of going everywhere with printed photos of your family, traditional leather wallets will become a museum artifact in the coming years.

The reasons? There are several, but we might start with the future dematerialization of the more than 1 billion credit cards currently in circulation. "I think the format of credit cards is likely to change," Bill Maurer, Director of the University of California, Irvine's Institute for Money, Technology and Financial Inclusion (IMTFI), tells LA NACIÓN. "We see a gradual migration towards a more virtual space, which is already beginning to be seen in online shopping," he adds.

Rubén Salazar Genovez, Senior Vice President of Visa Products in Latin America and the Caribbean, agrees that there is a need to move from plastic to an invisible environment in which payment credentials are maintained. "Connected devices are changing everything we know about shopping and payment. The web and mobile payments are just the beginning," he adds.

The expansion of mobile payment platforms and the consequent digitalization of money will also put banknotes and coins in check, but will not be enough to extinguish them. "I do not think cash will disappear," Maurer augurs. "Coin, in particular, is one of the oldest technologies in use that exists. It's incredibly durable."

According to this academic, the use of cash will endure among the lower classes, where access to financial services is limited. Even Anuj Nayar, Director of Global Initiatives at the electronic payment company PayPal, thinks that cash will withstand the digital onslaught. "There are still spaces for outdated technologies," he says. "The problem is the discomfort that comes with its use, its deterioration, what happens when it is lost."

In this context, it is estimated that this partial dematerialization of the means of payment will be tied to a noticeable drop in the role of human beings in some transactions, which will begin to be automated.

Things that talk to things

If Gartner's predictions are met, the Internet of Things (IoT) will be an established reality in the next four years. There will now be around 20.4 billion Internet-connected devices, from coffee machines to streetlights.

In this new world, diverse elements connected to Internet will have the capacity to transact with each other continuously and without the permanent supervision of users—a phenomenon that Maurer calls "ambient payments." "In the world of IoT, we will see some payments that happen in the background, especially at the level of micropayments," he indicates.

Gregorio Trimarco, of the Global Products and Digital Channels division of Mastercard, agrees with this vision. "We see that payments are going to be convergent. We believe that every connected device can be a payment device. The technology already exists for this to happen."

Imagine, for example, having a smart refrigerator with sensors that allows it to detect when a product begins to run out. Through a simple Internet connection, this appliance can put itself in contact with a supermarket every time it is necessary to replace the out-of-stock food.

Connected and autonomous vehicles might also be a determining factor in the expansion of this new economy. A system built into the automobile will allow, among other possibilities, to automate the payment of a series of services, like fueling, parking meters, and even automotive insurance.

There is also room for new payments in the virtual reality sector. Just this May, the payment processor Worldpay presented a proof of concept for a solution that allows consumers to buy items available in a simulated reality context.

Security, the last frontier

With new technologies come new problems. Any of the elements connected to the Internet will be vulnerable to cyberattacks, so ensuring the protection of privacy will become essential, especially when the financial integrity of users is at risk.

That is why multinationals like Visa, MasterCard, and PayPal are already preparing for a world in which passwords and payment voucher signatures will be nothing but distant memories. Among the technologies they are exploring geolocation and biometrics stand out, in their various facets: facial recognition, fingerprint device authentication, etc.

"The more complex the systems become, the greater the challenges," says Maurer. "It only takes one weak link to complicate the whole chain."

Translated by Taylor C. Nelms. Read original post (Wednesday, August 09, 2017) in Spanish here -

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