The purpose of this report is to take an in-depth view of IoT and discuss its impact on Customer Experience in the Financial Payments industry.

1. 1IOT AND THE PAYMENTS INDUSTRY
IOT AND THE PAYMENTS INDUSTRY
Driving Value within the context of Customer Experience
By Mike Navarrete

2. 2IOT AND THE PAYMENTS INDUSTRY
Executive Summary
AgreatdealhasbeenwrittenabouttheInternetofThings(IoT)overthepastseveralyears,
winning the attention of executives, technologists, and futurists alike. The purpose of this
report is to take an in-depth view of IoT and discuss its impact on Customer Experience in
the Financial Payments industry. In what follows, we’ll answer three questions:
1. How has IoT changed value-creation and the customer mindset?
2. What are near-term trends that need to be watched?
3. What are long-term challenges and opportunities?
In evaluating the questions above, our central finding is that the full potential of IoT is
nowhere near complete realization. In fact, IoT’s role in delivering value and driving
customer experience will only become more apparent as scale and interconnectivity
continue to grow.
Companies and executives that get in front of IoT will achieve a dramatic information
advantage over competitors, but doing so will require leaders to adopt a new dogma that
embraces data-driven decision making that centers on an optimized customer experience
and operational performance.
Content
Executive Summary 2
Our Understanding 3
1. Creating Value 3
2. Near-term Trends 4
3. Key Challenges 6
In Short 7

3. 3IOT AND THE PAYMENTS INDUSTRY
1 | Value-creation and Customer Mindset
IoT is disrupting the financial services industry as we know
it, and banks and payments issuers will have to evolve
in order to survive and remain relevant. The key point
to recognize is the shift in customers’ expectations for
hyper-personalized experiences – in the past it was easy
to offer a product that addressed a single need for a set
of customers. In this traditional model, businesses were
taught to differentiate by only offering additional features,
whizbangs, or widgets for a singular solution that still left
the customer unsatiated.
The interconnectivity of IoT directly challenges the
traditional model and is changing how business delivers
value. The future of value creation will rest in being able to
take the new streams of data to create seamless, intuitive,
and delightful experiences for the customer.
For the financial services industry, IoT will impact the
landscape in that products, particularly credit cards, will
no longer operate in controlled verticals. Companies will
need to leverage partnerships, shift their posture towards
Our Understanding
The Internet of Things (IoT) refers to the expansion of sensors, actuators, and devices that are connected by networks to
the Internet. We are now experiencing an important inflection point as businesses are bridging the connection between
physical objects and digital platforms, enabling new customer communication paths and channels. Currently, the promise of
IoT is both evidenced and contained in closed, siloed environments. The result of this state is that only a fraction of the data
available (and thereby potential) is being used by companies to improve their business.
The future of IoT will be dictated by a new narrative based on how quickly we transition from smart devices to smart-
connected devices to smart-connected-device systems to smart-connected-device-systems of systems. As we look down
the road, we stop to consider the strategic and tactical impacts that IoT will have on the Financial Payments industry.
Figure 1-Iterative Growth of IoT Connetivity
2018
SMART
DEVICES
SMART -
CONNECTED
DEVICES
SMART -
CONNECTED
DEVICE SYSTEMS
SMART - CONNECTED DEVICE
SYSTEMS OF SYSTEMS
35B
4B
2020+ YEAR
CONNECTEDDEVICES

4. 4IOT AND THE PAYMENTS INDUSTRY
redefining value for the customer, and transition towards
an IoT mindset, an idea originally introduced by Gordon
Hui. An example of the new paradigm shift can be observed
in reward programs – specifically in how they have begun
to coalesce into all-encompassing programs with multiple
earning strands and diverse reward strategies.
2 | Near-term Trends
No one has ever complained that the Financial Services
industy is too simple. We recognize that it is a complicated
ecosystemwithmultipleplayersandever-shifingtargets. In
terms of IoT, there are early trends that we have identified
that stand above the rest. They are the quick wins that
will drive immediate return on investment and delight
the customer.
TREND #1: HOME SHOPPING TO SHOPPING HOMES
There are multiple sectors that IoT will disrupt – ranging
from retail to health to cities and transportation. However,
in the world of the financial payments industry and the
cross-section of customer acceptance, the smart home will
be the gateway into IoT. This creates more emphasis on the
trend because the smart home is where the first impression
of IoT will be made and where issuers must fight for their
product’s utility.
Trend in Practice: Household Machines
1. Big-ticket appliances send issuers a notification
when the machine starts to show wear-and-tear
2. Issuer sends customer automatic credit offers,
anticipating an upcoming big purchase
3. Issuer incentivizes partnerships by offering lower
fees than competitors for each transaction
There are several other examples of smart, connected
products that are beginning to integrate with each other,
but they still exist as disparate systems and lack the value
proposition needed to disrupt established cycles, e.g.,
• Amazon Dash allows consumers to reorder CPG
essentials via small plastic Wi-Fi connected button
No one has ever complained that
the Financial Services industy is
too simple.
Traditional Product IoT Mindset
CUSTOMER
EXPERIENCE
Customer
Need
Solves for existing needs and
lifestyle
Address real-time challenges and provide
predictive feedback
Product Value
Proposition
Single use product that
becomes obsolete over time
Seamless, intuitive, functional, operates in
the background
Role of Data Single point of contact,
monolithic, informs future
requirements
Information convergence creates omni-
channel experience for products and
services/systems
Figure 2- IoT Value Creation & Mindset Crosswalk
Figure 3- Smart Home Integration

5. 5IOT AND THE PAYMENTS INDUSTRY
• Automatic pay via credit card integration and
Amazon Prime delivery within two days
• Washing machine texts when laundry is done and
detects when user is running low on detergent and
automatically reorders product, billing customer
credit card account
The evolution in the smart home poses a particular
challenge for issuers because after years of spending
marketing dollars on brand awareness, a refrigerator or
lightbulbisallofasuddeninchargeoftriggeringapurchase
rather than the customer or a traditional retail partner. In
this sense, data and partnerships will play a pivotal role in
connecting the dots for customers and paving the way for
issuers to provide personalized offers that will be relevant
to the customer and drive efficiencies or delight within the
context of the connected home.
TREND #2: DATA IS THE NEW BLACK
It will be incumbent for credit card issuers to coordinate
with merchants to maximize the application of IoT in
the retail environment and improve the sales cycle.
Personalization is the first stage of improving the customer
experience, e.g., 360 data sharing and integration via
beacons, location services, mobile, and RFID technology.
As these technologies become more prevalent and
accurate, they will allow retailers to improve the shopping
experience. The new shopper experience creates an
opportunity for issuers, in tandem with merchants, to
partner more closely with retailers to provide a more
convenient and secure payment experience - increasing
consumer spending while reducing costs for the retailer
and the credit card issuer.
Trend in Practice: Automated Checkout
1. Shopper picks up merchandise and walks out of the
store
2. Beacon at front of store automatically scans item’s
RFID tag and charges customer’s credit card
3. Automated checkout leads to higher customer
spending and reduced costs for merchandiser, as
well as reduced costs for issuer via more secure
tokenization payment
There are other examples of IoT chipping away at the fully
connected end-state that customers desire. For instance,
retailers are using geolocation technology to send near by
cardholder mobile notification with personalized incentive
based on buying habits and recent behavior (in and out
of store). In other areas, we are seeing examples of IoT
technology impacting airports (Heathrow), sporting events
(Major League Baseball), and hotels (Starwood).
Product
Content Content
Content Content
Content
Content
Content
Content
Content
Content
Content
Content
Product Centric Customer Centric
Figure 4 - Product to Personalization Shift

6. 6IOT AND THE PAYMENTS INDUSTRY
We can conclude that personalization is directly correlated
with data management, and there are several hurdles
that need to be overcome before customers can reap the
benefits of smart CRM, in-store personalized promotions,
optimized inventory, and a seamless transition from POS
to online to mobile. Until silos are broken down and open
architecture and standards are accepted, customers will
only be able to experience in limited environments.
TREND #3: THE GATEWAY TO A CASHLESS SOCIETY
Non-bank digital entrants such as direct peer-to-peer
payment applications (Venmo, PayPal), smart cards (Curve,
Stratos, Coin) and innovative pre-paid card platforms
(Mondo) have challenged customer expectations and are
disrupting the credit card industry for related reasons.
The idea of a cashless, global society is one that has floated
for many years. With every new innovation, be it a multi-
account card, digital currency, or intuitive auto-payment
application, banks and issuers must address the desire
of their customers to make their world seamless, simple,
and intuitive.
From a channel perspective, we know that the use of
smartphones and wearables will continue to grow, which
will create a greater emphasis on leveraging a digital
strategy to develop utility and value for the customer as
mobile devices become an extension of the wallet. Imagine
a time where using the information from a set of connected
devices, a bank could determine a credit score, determine
risk based on real-time data, underwrite policy, issue credit,
and allow a brand new customer to make a purchase within
a minute after they have applied via their mobile phone.
Banks must continue to push the envelope in digital
transformation to satisfy convenience seeking customers.
In a future where the physical “credit card” may not exist,
it is incumbent upon banks to leverage IoT ecosystem
to harness an accurate digital profile of their customers
in order to provide their customers with services and
capabilities that make having a credit card relevant.
3. Key Challenges
ThefullrealizationofvaluefromtheInternetofThingsdoes
not come without its own proprietary set of challenges and
risks. In any type of disruptive innovation that displaces
market leaders and challenges the status quo, there will
be a series of structural, tactical, organizational, and legal
issues that will need to be addressed. In the case of IoT
and the financial industry, these changes will be particularly
challenging due to the nature and inter-relationship of data,
privacy, and regulatory standards.
INTEROPERABILITY
IoT data collected from a variety of different sources needs
to be in the same format to enable collation. In order to
realize the full value of IoT, service oriented architecture
and open standards will need to be accepted – ironically,
Until silos are broken down and
open architecture and standards
are accepted, customers will only
be able to experience in limited
environements.
Banks must continue to push the
envelope in digital transformation
to satisfy convenience seeking
customers.

7. 7IOT AND THE PAYMENTS INDUSTRY
the catalyst for this environment is correlated by demand
and in the early stage of acceptance, customers at large are
still evaluating the ROI of IoT.
REGULATORY
Financial services is a heavily regulated industry and will
continue to become more regulated as it collects more
information. Banks will need to design systems that are
both in line with regulatory conditions regarding personally
identifiable information while still offering personalized
and relevant solutions based on personal data.
PRIVACY
With an estimated 30+ billion connected devices coming
online by 2020, customers level of comfort with sharing
their personally identifiable information will be a highly
debated topic. Providers of IoT devices and users of IoT
device data will need to determine how to respect the
confidentiality of their users while creating a compelling
value proposition to let them use their data.
SECURITY
IoT poses the normal security breach risks that consumers
are familiar with, but in creating a system of systems, it
introduces several complex layers of liability. Personal IoT
data stored on Wi-Fi networks and servers are vulnerable to
cybersecurity and privacy breaches, but depending on where
a breach happens, it may be difficult to determine who should
be held responsible.
In Short
Although we are not exactly in danger of having SkyNet take over – the machines are certainly talking to each other. In the
next phase of the IoT transformation as it relates to the payments industry, we have landed on three key takeaways:
1. Invest in the future: Senior Leaders and Executives should be evaluating how the new technologies, databases,
device management, and business rules integrate with their business, partners, and external stakeholders in a way
that will allow them to achieve real-time response and build to scale.
2. Shift your mindset: The companies and executives that get in front of the IoT growth will achieve a dramatic
information advantage over their competitors, but doing so will require leaders to adopt a new dogma that embraces
a data-driven locus of control.
3. Address key painpoints: Key challenges are the evil-twin of key differentiators. Strategies that can successfully
address this customer pain-points will effectually drive solutions that center on an optimized customer experience,
win the hearts of customers, and improve operational performance.
And naturally, while all this change happens, don’t forget to keep your number one priority in mind: the customer…after all,
that’s the whole point, right?

8. 8IOT AND THE PAYMENTS INDUSTRY
irisConciseisthemanagementconsultingarmofirisWorldwide,aglobalcreativeagency.ThroughthekeyfocusareasofCommercial,
Customer, Marketing, and Digital Strategy, we help businesses understand their customers and grow more profitably.
Mike Navarrete is a Director in the New York Office and leader of the Customer Experience practice. For more information, email
Mike.Navarrete@iris-worldwide.com
Special thanks to following contributors:
Dane Grossman, Senior Manager, New York
Jordan Harper, Chief Technical Officer, London
May Michaely, Graduate Fellow, New York
LONDON NEW YORK AMSTERDAM CHICAGO SYDNEY ATLANTA SHANGHAI SINGAPORE