Transaction Trends

By Laurie Goeman, executive director and merchant services expert, JPMorgan Chase

Your refrigerator orders your groceries. Your home automation system spritzes your favorite scent. Your self-driving car knows where your favorite coffee shop is — and automatically takes you there.

Sound like something out of a sci-fi novel? These are just a few new “Internet of Things,” or IoT, technologies demonstrated at recent trade shows. Making them everyday realities is upending the way companies design, produce, and price their products and services, not to mention the way consumers and businesses consume them.

The information these devices supply is key to learning how best to streamline business processes, enhance customer experience, and remain competitive and relevant in a fast-changing world. Making money from them is the next frontier.

‘Banking’ on Big Changes

According to research from Cisco, personal and machine-to-machine (M2M) device connections will increase by more than 60 percent, from 16.3 billion at the end of 2015 to 26.3 billion by 2020.

Banks are not all standing on the sidelines in this revolution. IoT-generated data can lead to enhanced understanding of customer behaviors and needs, in turn leading to product and service innovation. For example, Chase is testing beacon technologies, sensors that “pre-announce” customers (who opt in) before they step up to a teller or even an ATM, saving time and making the visit more personal.

As important, IoT-powered devices have the capability to make payments more convenient than ever before, on both sides of the transaction. Taking a commanding role in supplying payments service to IoT vendors would go a long way toward helping banks retain their leadership in payments. Unfortunately, most banks are burdened by legacy infrastructure, including payments systems that simply cannot meet the requirements of personal device or MTM connectivity.

Hurdles to Connectivity

Even merchants who have invested heavily in technology find their customers have difficulty with the payments platform integration process. Try as they may, IT professionals on both sides inevitably face lengthy and laborious technology integration to bring a new device or service into their payments stream.

The problem: On the bank side of the equation, programming language, message format, transaction device, etc., are proprietary and mandated. Often, clients must retain more expert and expensive programming talent and completely change over data communication protocols to comply.

Further complicating the process, the IoT is not made of just PC or mobile devices, which rely on well-developed standardized and shared technology platforms. Standards for IoT connectivity vary widely and planned usage can also impact choices, making for a near-infinite universe of decisions before product development begins.

Solving the Software Puzzle

Recognizing the growing need, J.P. Morgan recently introduced a software development solution designed to help clients integrate with their new merchant payments platform quickly, easily, and with much less manpower and out-of-pocket costs. The new tool operates in the Java™ Runtime environment so that any payments application being developed, written in any modern programming language, can access the development software tool using internet-driven programming techniques. Clients simply download the tool from the client developer center.

Whether a pricing strategy calls for a one-time payment, per-use transactions, or a monthly or annual recurring plan, quickly and seamlessly connecting to a payments platform is becoming critical for IoT manufacturers and vendors. The important lesson for payments providers in this wide-ranging new marketplace is that, as monetizing the Internet of Things rapidly evolves, the mandate of rigid, bank-driven programming protocols and language requirements simply must change.

Laurie Goeman
Executive Director, Merchant Services, J.P. Morgan

Laurie Goeman is Executive Director for the Merchant Services group of J.P. Morgan. Laurie has extensive experience with large, complex clients in the payments strategy and technology sectors. She strategically manages relationships with senior client decision makers to ensure the needs of clients are anticipated, and solutions and resources are coordinated to enable omnichannel commerce.

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