The way your car interacts with its environment—from parking meters to gas stations—is going to become a whole lot cooler. At the 2017 Consumer Electronics Show (CES) in Las Vegas, Visa and Honda brought the Internet of Things to life by demonstrating in-vehicle payment for parking and fueling, showcasing the simplicity and convenience of mobile payments directly from the vehicle.
To learn more about the connected car, as well as Visa’s approach to the Internet of Things in general, John Parkin, Visa’s senior writer, sat down with Avin Arumugam, Visa’s senior vice president of IoT.
John Parkin: Many people have likely heard the phrase “Internet of Things,” or IoT, but what does it mean, both in general and for Visa and the payments industry?
Avin Arumugam: If you talk to 10 people today and ask them what IoT is, you get 10 different answers. So let me tell you what I think the Internet of Things is. The Internet of Things involves devices connected to the Internet and it’s solving practical problems that businesses and people face daily in a really elegant way.
As these devices begin to get more and more connected to the Internet and to each other, consumers are going to want better and more experiences that enrich their lives using these devices. Now, at some point when these things start to get connected and consumers start to go, "That's really cool. I can use my remote control in my house to manage the temperature or the lighting," or "I'm wearing a wearable, and it can tell me the time or my heart rate," we believe at some point somebody will say, "Man, I wish I could pay for that." At the end of the day, there's going to be somebody selling stuff and somebody buying stuff, and they're going to come talk to the payments people. And they're going to ask us: "Hey, can you help me transfer that value to me so that I can get access to that?" So that's what IoT is for us.
We're in the foundational stage of making sure that we embed the network-tokenization protocol into these different verticals so that when it becomes mainstream, a Visa payment will be really simple and normal for somebody to start saying, "Oh, good. My Visa card works with it." That's where we want to be.
Parkin: What are the big opportunities that we're pursuing related to IoT?
Arumugam: When you have a category that is projected to grow to 20 or 30 billion devices in a few short years, there are a lot of ways to slice opportunities. We see momentum happening across a range of categories including wearables, which we define as anything on the human body, be it a watch or an item of clothing, the connected car and connected home, retail and city infrastructure. We really look at these categories and the opportunities by asking ourselves whether people are using related devices for commerce yet, or are they just talking about it.
Amazon Go is a really interesting example I like to talk about, because Amazon said: "Well, there's a lot of hype. We can do a lot of things." But no merchant was going to do anything first. So what Amazon did was say, "You know what? We’re just going to create our own store to show you the possibilities." But is that going to happen right away? No. But it's prompting merchants to say, "Ah, that makes sense." I think in two or three years retail will either be the second or the first vertical that we are focusing on, and the biggest one.
Parkin: When we talk about retail in this context, it's actually about what the retailer is doing versus users wearing something on their bodies that interacts with something during the retail experience.
Arumugam: Correct. You can wear anything you want; but if the merchant or the retailer doesn't accept it, it's a nice piece of jewelry. And hopefully it gives you some functionality and payments is not the only benefit. I was talking with one of my leads, and she made an excellent point: No wearable is going to be just purely payments. There's always going to be something else. I asked, "What about the Visa payment ring?" She replied, "It's jewelry." The design gives it a "cool" factor, and it's a conversation starter.
Parkin: Let’s talk about the connected car.
Arumugam: With the connected car, the possibilities are absolutely endless in all the different commerce trigger points that happen in your daily drive to work. As you're driving, you think, "Oh, there's a Starbucks." I could preorder my Starbucks coffee, and pick it up as I'm driving. I've got to pay for parking. Oh, it's my wife's birthday—I've got to buy something. I’ll use voice command to say: "Can you get me some flowers?" That sort of thing.
And all those different interaction points are for a car that's getting more and more connected. The examples I gave you are pretty rudimentary and you might be thinking, "Yeah, yeah. I heard this 10 years ago.” But now the reality of how these cars are getting more and more connected is actually upon us.
All these cars are getting connected to the Internet. Now the question is: Are they GSM-connected? Will they have cellular connections? The tech giants are talking about a different sort of connectivity: connectivity with your surroundings. How that evolves will tell us how the connectivity for the overall device evolves.
Those are the things that are going on in regards to the car. We’re not certain exactly how it's going to work, but we do know at some point—we're thinking about two to three years—a consumer is going to be sitting behind the driver's seat of his car and say: "I want to pay for that."
And remember the cycles in cars are much longer than anything else. Developments take five years, so we've got to start now to make sure that we get embedded into these cars so that payments can happen.
Parkin: How has it been working with Honda on the connected car?
Arumugam: Honda has been great. We've had a relationship with them for years. We unveiled a couple of things at Mobile World Congress last year. What we’ve done for CES is put together a working prototype with two other companies working with Honda. One is IPS, which has parking meters all across the country. The other is Gilbarco Veeder-Root, which has the gas pumps. So through an integration in their center console, a consumer can pull up to a parking meter, ensure it’s the right parking meter and then execute a payment using a Visa card. We've talked about the possibility before, but we actually did it. It actually worked.
We conducted a pilot in San Diego with IPS and their parking meters, and we're really pleased with how well everything is moving. We're looking forward to continuing to work with them, to iterate as Honda decides to put this into their dash for the rest of their cars.
Parkin: So there are two elements needed in order to make it work? It's more than just, "Honda has a car that's ready." It's also, "The infrastructure exists that's ready for it."
Arumugam: Correct. And that's an important observation you just made. So we're working with Honda Design Studios down in Silicon Valley, and they use it sort of like a Petri dish to bring in all these different infrastructure players to try things out. And what they realized was that once cars connect, people will want to make some sort of payment. That's why it was a natural fit to bring the IoT team for Visa to the design studio. We've worked with different people in Product to bring our innovations to them and help them design this awesome experience, and we're really excited for the Visa and Honda announcement at CES.
