All the major financial institutions have digital commerce as a part of their strategy toward the creation of the omni-channel environment for their end-customers. With less entry-barrier than ever, technology players are partnering with merchants and consumers for easier commercial model and their shorter innovation cycle. For staying relevant in the industry, conventional players must reshape their business model.
The Transition from Digital Commerce to Connected Commerce
Commerce in the digital world begins with a sensor extracting data from devices, analyzing and interpreting data to gain insights on user’s needs, providing the best-matched services or products with minimal user interference during the event. The global market for IoT products is positively impacted by factors such as evolving consumer’s lifestyle and increased preference for technologically improved products.
Effect on the Payment Industry
Online and mobile payment requires banks, networks, and processes to evolve their existing service paradigm. IoT technology provides an opportunity for a card network or a processor, or a bank to move up the value chain and produce a connected environment for commerce that supports sensors, network and security, and gateway cloud. In spite of processing, accepting, clearing & settling payments being at the center of their business, it does not provide them with a competitive edge. Traditional players need to adapt and transform in their business models to create new service line across the market segments.
With things around us getting connected, global commerce is expected to see dramatic growth, but the banks must support the same by providing payments infrastructure to process real-time payments in an IoT environment. The connected device can produce a transaction value of 10^-4 or of lower denominations, which is much lesser than what a dollar system can support.
IoT is set to disrupt the conventional commerce cycle. However, it needs real-time processing with no processing cost of payment against a traditional banking system. Thus, there is an increase in the adoption of cryptocurrency like bitcoin that will offset the transactional cost in the conventional setup. Hence, it depicts a significant shift from the traditional structure that gains from transactional processing such as discount fee, interchange fee, and chargebacks