Internet of Things-driven payments in the mobility landscape

30 April 2024 4 min. read

The Internet of Things (IoT) is emerging as a transformative force across sectors, particularly in the realm of mobility. Imagine a world where machines initiate transactions seamlessly, where connected devices orchestrate payments autonomously, and where smart cities leverage IoT to optimize transportation systems.

To start with: what is the Internet of Things? At its core, IoT refers to a network of devices embedded with sensors, software, and connectivity that enable them to collect and exchange data over the Internet. While the concept often conjures images of smart home appliances like refrigerators that order groceries, IoT’s potential extends far beyond domestic settings.

In the context of mobility, IoT empowers vehicles, infrastructure, and wearable devices to become transaction enablers, capable of initiating and processing payments seamlessly.

Internet of Things-driven payments in the mobility landscape

Consider the modern connected car, equipped with GPS navigation, telematics systems, and in-vehicle sensors. Beyond facilitating navigation, these IoT-enabled vehicles can autonomously transact at toll booths, pay for parking, or even engage in peer-to-peer transactions with other vehicles or roadside infrastructure.

This fusion of transportation and financial technology represents a paradigm shift in how mobility services are accessed and monetized.

Practical use cases

To grasp the tangible impact of IoT on mobility transactions, here are three practical and high-impact use cases:

Internet of Things-driven payments in the mobility landscape

Plug and Charge for Electric Vehicles (EVs)
The Plug and Charge system exemplifies the seamless integration of IoT and payments in the EV charging ecosystem. When an electric vehicle plugs into a compatible charging station, IoT-enabled communication between the vehicle and station not only manages the energy transfer but also facilitates secure billing and payment processing.

This automated transaction flow ensures accurate billing based on real-time energy consumption, eliminating the need for manual payment processes.

Geolocation Ticketing for Public Transport
Geolocation ticketing leverages IoT technology to streamline fare collection and enhance user experience in public transportation systems. By utilizing passengers' smartphone GPS data, IoT-enabled ticketing systems automatically calculate and charge fares based on travel distance or zones traversed.

This approach not only simplifies fare collection but also minimizes reliance on physical ticketing infrastructure, reducing operational costs and improving efficiency.

Road Pricing and Congestion Management
IoT plays a pivotal role in road pricing initiatives aimed at managing urban congestion. In cities like Singapore, IoT-powered toll systems use sensors and communication technologies to track vehicle movements and apply dynamic pricing based on traffic conditions.

This data-driven approach incentivizes off-peak travel, reduces congestion, and optimizes road infrastructure utilization – a testament to IoT’s transformative potential in urban mobility.

IoT-driven payment transactions

The adoption of IoT in mobility transactions offers compelling benefits:

Instant Transactions: IoT-enabled payments occur seamlessly and instantaneously, enhancing user convenience and transaction efficiency.

Frictionless Experience: By automating payment processes, IoT eliminates traditional friction points associated with manual transactions, such as queuing or card swiping.

Data-Rich Insights: IoT devices capture rich data during transactions, enabling enhanced analytics, personalized services, and improved decision-making.

Despite these advantages, IoT-driven transactions pose unique challenges:

Asynchronous Payments: IoT transactions often decouple the payment initiation from the transaction event, introducing complexities in settlement and reconciliation.

Security and Privacy Concerns: Connected devices are vulnerable to cyber threats, requiring robust security measures to protect sensitive transaction data.

Consent and User Engagement: User consent and enrollment are critical for IoT transactions, necessitating transparent communication and user-friendly interfaces.

To fully unlock the potential of IoT-driven payments in mobility, collaboration and innovation are essential. Industry stakeholders must engage in dialogue to establish standards, initiating targeted pilots and proof-of-concepts will facilitate experimentation and validate IoT payment models in real-world settings.

About the author: Bas Van Donselaar is a consultant at PaymentGenes, where he leads the Strategy practice.