No matter the industry, deployments of Internet of Things technology have a way of bringing about major change. From the significant rise in smart appliances and devices in the home to the many applications of IoT in manufacturing facilities, cities, and offices, IoT products have emerged as valuable additions in many different industries. These products are capable of overhauling existing operations and giving rise to new markets.
Thanks to a project led by Mitsubishi UFJ Financial Group (MUFG) and Afero, IoT innovations promise to extend to the financial services industry. This Afero-MUFG collaboration is about managing unattended smart transactions in retail environments. It’s the starting point of an expansive vision that we call the Bank of Things.
The Overall Architecture
Broadly speaking, there are 3 layers in an IoT implementation: a fleet of devices, the IoT platform that connects them to the internet and controls them, and business applications that are written on top of the IoT platform.
Think of the platform as a decentralized software layer that blankets the device, mobile apps, clouds, and data paths. In this case, banking applications such as payment processing or funds validation interact with the Afero IoT Platform.
The Bank of Things project appears to be the first significant injection of IoT into the world of payment systems and payment processing, offering the potential to advance not only the way payments are made, but the way we think about payments.
Unattended Retail and the Need to Eliminate Traditional Point-of-Sale Equipment
Buying merchandise by scanning the price with your phone and then taking the item with you is already quite common. This project is different. The Bank of Things project is about eliminating traditional point-of-sale equipment, which is useful for devices that:
- Deliver a service to customers over a long period of time,
- Require micro-transaction support, and
- Could be deployed in unattended retail environments.
Traditional point-of-sale equipment requires a constant connection to the internet. The cost of building and operating this equipment includes connectivity hardware, keyboard, screen, associated maintenance, internet connection subscription costs, credit card fees, cloud-based payment processing fees, etc. To make overhead costs acceptable, attendants must use the equipment across several devices and avoid small transactions. When it comes to very small micro-transactions, there is really no solution.
The challenge is to find a way such that:
- Each service-delivery device performs its own point-of-sale tasks.
- Response time is close to instantaneous to meet customer expectations.
- The costs are low enough to make this approach practical for micro-payments.
- Scalability is built-in so [insert impressively large number] of micro-transactions can be handled across [insert another impressively large number] of devices.
Plus, all these requirements need to be met without the need for either local hubs or continuous internet connection for any of the devices, and the device needs a way to receive authorization to deliver the service and then send verification of its delivery. But how?
It turns out the device needs an independent private connection to the internet only at the time of the transaction, and that is the key to the puzzle:
- On the device side, at the point and time of a transaction, there is always a customer who is transacting via their phone, who can provide authorized access to the device through their phone. Thus, the device can piggy-back on the customer’s phone to establish a private connection with the necessary cloud applications.
This is really clever but it’s not enough. The process must also be secure and instantaneous, and device connectivity must be low cost and low power.
- On the cloud side, this means elastic (for scale) multi-zone (for reliability) implementation with special emphasis on hardware root of trust (for security) and latency minimization (for customer experience).
This is exactly the approach taken by the project. So now the picture looks like this:
You can read more about the ABLE technology for device connectivity in a recent press release: “Afero Introduces ABLE™ Technology, Low-Cost Secure BLE-to-Internet Connectivity for Point-of-Sale Devices“. In addition to payment data, the secure channel created with ABLE technology can be authorized to upload device telemetry, allowing the owner of the Unattended Retail device to get reports on the current status of each device, inventory levels, supply requirements, purchase trends, and other usage data.
The Use of Cryptocurrency and Blockchain
Because a fleet of service-delivery devices is decentralized, demands authorization and rights management, and relies on a process to verify the delivery of service, it lends itself to implementation on a blockchain using cryptocurrency and smart contracts. In fact, there are several projects that aim to bring blockchain to IoT to track and secure the movement of materials in various supply chain applications.
The Afero-MUFG collaboration goes further by combining IoT, banking (payment processing), and blockchain to enable a new market for retail: practical low-cost micropayments at scale.
Sculpting the Future of Payment Processing
As with other industries, IoT is becoming an important part of the future of financial services. Payment processing has already made advances as analog money and bank cards have led to point-of-sale software and mobile payment apps that can run on a merchant’s tablet computer or smartphone.
With the addition of IoT, we can expect entirely new payment models to emerge. Thinking beyond unattended retail, where a person pays a thing directly (P2T), we can imagine situations where a thing pays another thing (T2T) without human involvement via a smart contract, according to events and policies. Bank of Things can create an instant transactional marketplace that is post-credit card and post-cashier, with dynamic pricing and enhanced security throughout.
New Business Models
The Bank of Things goes much deeper than convenience and automation. It can lead to new business models and new customer experiences. As it grows in popularity, new data services will enable new customer experiences, improved with service. They will represent new revenue streams while automation reduces both capital and operational expenditures.
The Afero IoT Platform
The Afero IoT Platform is designed to encourage innovation and bring IoT-inspired ideas and concepts into reality. The Bank of Things collaboration between Mitsubishi UFJ Financial Group and Afero is a great example of this.
If you’re interested in learning more about Afero, our IoT platform, the Bank of Things, or just IoT in general, please don’t hesitate to contact us. Your next innovation could start today, so why wait?