LAS VEGAS -- Just before the 2016 Summer Olympic Games, credit card company Visa partnered with watch maker Swatch Ltd. to release in Brazil a wearable device that visitors to Rio de Janeiro could link to a prepaid card to pay for purchases. The device, dubbed the Swatch Bellamy and also available thus far in China and Switzerland, uses a near-field communication chip built into an analog watch to make electronic payments.
Now Visa is looking to make use of the data generated by the watches as part of a broader initiative to track purchasing habits and trends by analyzing information from wearables and other new types of connected devices. The Swatch Bellamy is just one way Visa is betting big that the internet of things and IoT analytics tools will play a huge role in the future of payment processing.
"Right now, IoT has opened valuable opportunities," Tania Oliveira, a senior business leader at Visa, said during a presentation at the SAS Analytics Experience 2016 conference here last week. "We can see customer preferences through digital consumption, and we can leverage that data to provide a better customer experience."
She said people are increasingly adopting alternative payment methods, and the number of ways people pay is only going to increase in the future. In the near term, more people are buying wearables, connected cars and entertainment consoles that are capable of purchasing apps, content and in-person goods. Further down the road, connected home devices, such as refrigerators, thermostats and virtual assistants, will balloon the total number of devices from which payments may be generated. IoT analytics tools can help make sense of all the data.
Oliveira cited the popular claim that there will be 50 billion connected devices by 2020, which originated with network device companies Ericsson and Cisco. The data streaming from all these devices could be a treasure trove for data analysts.
"It's a huge number," Oliveira said. "The concept here is more than the internet of things; it's the internet of everything. This is the opportunity."
New business opportunity with IoT data
Visa wants to cash in on this opportunity by analyzing the payment data streaming from all these devices and providing business intelligence back to merchants that gives them useful insights about their customers.
The company's consulting arm, Visa Performance Solutions, developed a set of analytical models around this data. The models are based on algorithms that evaluate payment data, as well as data from merchants' customer databases, to assign a value to each Visa purchaser on how likely they are to pay using any method aside from swiping a plastic card at a register. Merchants can use this information to build profiles of their customers to drive marketing or product development efforts that are tailored to their customers' specific payment preferences.
The system is built around a Hadoop back end that ingests payment and merchant data. Analyses are run in SAS software. Merchants can choose to receive the basic score of their customers' digital preferences, or they can implement recommendations with help from Visa's marketing consulting group.
Driving to a smoother payment process
One potential model for how tailored purchasing options can drive sales is Uber. Oliveira pointed out the ride-hailing app makes it so easy for users to request and pay for a ride that they often don't feel like they're paying. This "frictionless" payment process improves the customer experience, she said.
"The way [customers] pay is different now," Oliveira said. "You have to understand their preferences." Merchants can create a similar experience for their customers by understanding their preferences, and this understanding comes from analyzing the data from multiple devices.
The internet of things could be one of the most defining technologies of the generation. McKinsey & Co. has estimated that connected technologies could create $11.1 trillion in economic value by the year 2025, or about 11% of the world's economy.
So, the stakes are high for both merchants, whose products and services need to leverage IoT technology, and payment processors like Visa, who need to accommodate a variety of payment methods. Successfully implementing IoT analytics tools could play a critical role in a business' ability to compete in the next decade. "IoT is more than a device," Oliveira said. "It's a new way customers can express themselves."
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