The Internet of Things: A Prime Opportunity for Merchant Acquirers

The Internet of Things:
A Prime Opportunity for
Merchant Acquirers
The IoT and its ecosystems allow merchant acquirers
to discover new sources of revenue and add
more value for the customers they serve.

2 KEEP CHALLENGING November 2016
Executive Summary
The payments industry, like many others, is undergoing
unprecedented change. Consumers’ experiences with online retailers
and “born digital” companies have raised their expectations of
digital interactions and transactions with financial institutions,
utilities companies and government agencies alike. To improve the
digital experiences they afford, merchant acquirers must deepen
their understanding of customer behavior, the current regulatory
environment, technology advances and options, and what
competitors are doing.
For example, emerging financial technology companies (fin-techs)
are already setting a high bar. Along with more progressive financial
institutions, they are churning out a slew of innovations that make
the ever-changing payments landscape even more complex and
challenging. Against this backdrop, payments players must work
harder to insulate their existing systems and processes from the ever-
present threat of fraud and security breaches.

THE INTERNET OF THINGS & MERCHANT ACQUIRERS 3
As was evident during the adoption of EMV regulations in the U.S.,1
merchant acquirers are late in reacting to industry processes and
underlying changes.
To rectify this situation and succeed in the age of digital, these
companies can take advantage of the Internet of Things (IoT) –
the global network of small, powerful sensors and interconnected
“things” that enables physical devices objects – from desktop and
notebook computers, to wearables and smartphones – to link and
share data through the Internet. The IoT holds immense potential
for merchant acquirers to partner with device manufacturers to
generate new revenue streams and remain relevant in this continually
changing environment.
This white paper provides recommendations on how merchant acquirers
can tap into the IoT’s potential, take advantage of market dynamics and
trends, and confront the key challenges of the IoT’s growing network –
with the goal of giving decision makers the insights they need to define
and implement an effective IoT investment strategy.

The Changing Dynamics of the Acquiring Industry
Consumer Behaviors
Today’s financial Institutions face ever-increasing consumer and corporate
demands – starting with the pressure to address the growing number of digital
payment channels (mobile point of sale, contactless, near field communications
(NFC) and wearables, for example). The surge of smart devices and applications has
created a culture where immediate, secure access to information and services is
not only expected, but demanded.
Increasingly, consumers expect a digital experience
that approximates an ideal physical setting. Aside from
one-click, type-or-swipe access, they look for fast,
highly personalized service on demand, any time, at
every encounter. They also expect these services to
cost less. Financial institutions are quickly learning that
it’s not just about processing transactions; it’s about
engaging customers and delivering value throughout
the transaction cycle.
New Competitive Threats
Established payment institutions face competition
from both traditional and non-banking players, such
as fin-techs. In fact, the competitive landscape is now populated with companies
looking to expand their global footprint.
2
One of the most successful, Payoneer,
is ranked among the top 100 of Inc. 5000’s financial services companies. Its cross-
border payments platform connects businesses, professionals and currencies in
more than 200 countries. Established institutions are innovating by creating light-
weight and offshoot brands. But the most notable developments have been seen
in digital-born organizations such as PayPal, Google, Amazon, Apple and Square
Inc., which have created services to complement their core business. Emerging
digital wallets and the rapid proliferation of app-based mobile payments have
enabled non-payment technology players to challenge, if not disrupt, the tradi-
tional payment space.
There is a distinct possibility that credit card use will decline as consumers explore
alternate modes of payment. As more innovations enter the marketplace, acquirers
and other traditional payment companies will have to develop solutions that
anticipate and accommodate consumer preferences and impending technologies.
For example, Square, Inc., develops and provides payment processing, point-of-sale
(POS), financial and marketing services worldwide. The company automated its
customer-onboarding and underwriting processes, significantly reducing the time it
takes to get merchants up and running – from a few days or even weeks, to a few
minutes. MasterCard already announced a program that it informally calls the “Internet
of Payment Things” (IoPT). The goal is to turn any consumer gadget, accessory or
wearable into a payment device – from a ring to a fitness tracker, to car keys and more.3
Due to their infrastructure and technology requirements, these kind of innovations
are forcing conventional payment firms to strengthen their capabilities, particularly
in back-office processing.
Financial institutions are
quickly learning that it’s not just
about processing transactions; it’s
about engaging customers and
delivering value throughout the
transaction lifecycle.

Fraud: A Growing Concern
Fraud remains a major issue throughout the payments industry – particularly in
light of the increasing incidents of stolen credit-card numbers and personal data
breaches that take place at various layers of the payments ecosystem (retailers,
banks and acquirers). EMV provides a level of assurance by countering fraud with
card-present transactions. But the cat-and-mouse game played by hackers suggests
that threats will continue for the foreseeable future.
In 2015, card fraud reached $21.84 million – a figure that is expected to rise to
$31.67 billion by 2020 – up 20.6% from 2014. According to Nilson, card fraud can
now be attributed to the migration of card payments from magnetic stripes to EMV
chips and pins.
4
Interestingly, a 2015 report from Barclays states that the U.S. leads
the way in credit card fraud, accounting for 47% of the total share. This in spite of
the fact that the country makes up only 24% of the global card volume.
5
Assessing the Iot’s Potential
Imagine that every single article in your pocket, in your briefcase and on your
body could be used to make a payment. It is not far-fetched to think of a day when
consumers will be able to use their car keys or finger rings to make payments in the
grocery store. (The Internet of Things’ connected devices and mesh networks are
among Gartner’s Top 10 Strategic Technology Trends for 2016).6
Thanks to the explosive growth of smartphones and tablets, and
the increasing number of devices connected to the Internet at a
much faster rate, the mobile payments market is expected to grow
122% from $325 billion in 2014 to $721 billion in 2017. By then,
the use of mobile wallets is projected to increase 183%, and be
available to over 43% of smartphone owners.
7
If all the devices
used for payment transactions are included, the market for
payments processing would grow exponentially (see Figure 2).
The IoT represents the next stage of Internet development, and a
major stride in how companies gather, analyze and distribute data.
Over time, data and payments will become inextricably bonded;
users will have a “digital identity” that stores everything from
their payment details to digital signatures and biometric data.
Contextual Commerce for Merchants &
Acquirers
Contextual commerce makes purchasing natural and simple –
taking into account a person’s interests and intent to buy. For
merchants, the Internet of Things’ vast connectivity makes it
easy for consumers to purchase within an environment that is
intuitive, familiar and comfortable. (Consider the recent “buy”
buttons appearing on Facebook, Pinterest and other social media
sites). For acquirers, there is the opportunity to provide various
interfaces for accepting payments from all connected touchpoints,
creating an omnichannel experience for customers.
At the same time, acquirers must be able to accept payments
from all IoT touchpoints. Once merchants incorporate APIs into
their open platforms (which they can either rent or buy), users
can connect, manage and control all of their smart, IoT-linked
devices in one place. Acquirers will not only have the opportunity
Number of Breach Incidents by Source
Malicious Outsider
Accidental loss
Malicious Insider
State Sponsored
Hactivist
55%
25%
15%
4%
1%
Source: creditcards.com
Figure 1

to increase their volume of transactions by acting as a payment processor; they
will also be able to generate revenue by providing services such as tokenization,
electronic identification and fraud detection. This will enable integrated, seamless
payment capture/point of interaction from a range of devices and form factors
(including mPoS-type devices) – allowing consumers to start a transaction in one
channel and complete it in another.
Figure 3 (next page) illustrates the role of APIs in facilitating the
process of accepting payment from all connected devices.
It is estimated that app-related revenues reached $25 billion in
2013 – a figure that is expected to break the $70 billion mark by
2017.9
Presently, a small but growing portion of these returns comes
from organizations that make their data available through appli-
cation programming interfaces (APIs). By allowing third-party app
developers to utilize their aggregated data and selected services,
companies gain multidimensional, demographic insights into buying
trends across product categories, geos and socio-economic groups.
APIs have the potential to generate revenues in one of two ways
for acquirers that choose to expose their processing systems.
A merchant acquirer can make its processing platform available
to third-party apps through a pay-per-use model. They can also
generate revenue through subscription models, in which fees
accrue during a subscription period rather than on a per-use basis.
Opportunities Ahead
Given the immense potential of IoT-enabled payments, we believe merchant
acquirers need to anticipate and take advantage of evolving customer demands
and technology advances.
Source: Cisco IBSG, April 20118
Figure 2
6.3
6.8
7.2
7.6
0.5
12.5
25
50
2003 2010 2015 2020
Connected Devices in Millions
2003 2010 2015 2020
World Population in Billions
0.08
1.84
3.47
6.58
2003 2010 2015 2020
Connected Devices
Per Person
More Connected Devices Than People
Connected Devices Per Person
Acquirers will not only have
the opportunity to increase
their volume of transactions
by acting as a payment
processor; they will also be
able to generate revenue
by providing services such
as tokenization, electronic
identification and fraud
detection.

Following are trends that the payments industry must prepare to act on and accom-
modate in the near future.
Connecting All Customers
While mobile wallets make the payment process simpler and faster by taking
plastic cards out of the equation, the industry needs to focus on a time in the
not-too-distant future when virtually all devices will be connected through the
Internet of Things and linked via standard Internet Protocols (IP) – resulting in a
seamless, efficient and highly secure payment process.
For example, analytics will be used to predict a customer’s needs and make sug-
gestions that the customer will see as valuable; in another scenario, companies
can use inventory analysis and customer spending trends to offer customers
options at the time of payment, such as similar products that are less expensive
or have higher customer ratings. This can dramatically improve customer loyalty,
increase mindshare and help improve the brand’s standing in the marketplace.
Ending the Checkout Line
An effective and feasible solution for minimizing lines in physical stores is long
overdue. In the near future, consumers will not be expected to use their smart-
phones to find items inside or outside a store, nor will they have to wait patiently in
line to pay for their items with a plastic card as they do today. And they won’t have
to perform contactless transactions by tapping their phones or watches against
Plug-and-Play Payment Processing
Source: McKinsey & Company
Figure 3
Food
Manager
Connected Devices
Token Service Provider
Secure Payment
Gateway

a POS terminal. Instead, they will use cloud-based apps on their smartphones to
check out purchases inside the store and, increasingly, use these devices to pay
for items before they enter the store. These capabilities will be made possible by
the many connected end points of the Internet of Things.
Complementing the Connected Car
In 2015, Visa unveiled its connected car proof-of-concept, which enables vehicles
to not only communicate with each other on the road, but potentially become an
extension of payment cards. This capability will enable seamless, on-the-go trans-
actions, supported by advanced auto infotainment systems and critical safety
features. (See Figure 4).
The Smart ATM
Since many acquirers have invested heavily in the ATM business, it’s important that
they explore and exploit all the opportunities presented by smart ATM solutions,
which leverage the Internet of Things to provide superior customer experiences,
high security, and advanced analytical capabilities. Figure 5 illustrates the possibili-
ties of smart ATMs, such as location-based messages/offers, behavioral messages/
offers, wearables-based customer authentication, and predictive maintenance.
The Smart Kiosk
The smart kiosk is another example of solutions made possible by the IoT.
It is imperative that acquirers invest in this channel to further enhance the
customer experience. Figure 6 shows how smart kiosks can help increase customer
satisfaction and loyalty, and support cross-selling and up-selling for retailers. These
channels also enable retail distribution partners to offer advanced and efficient
digital gifting solutions to consumers – creating a win-win for merchants and
gift-card issuers.
Figure 4
The pump beacon
senses a car’s arrival
at the station.
The beacon and the car app
communicate to determine
the amount of fuel needed
and place the order.
The customer pays
from his car and
checks merchants’
loyalty offers.
Pay for Fuel, Compliments of the Connected Car

Smart Replenishment
Future devices will be smarter – able to take appropriate actions such as making
purchases or payments. Amazon’s DRS (Dash Replenishment Service) is a notable
example. DRS can be integrated with devices in two ways to place an order with
Amazon. Device makers can either build a physical button into their hardware
to reorder consumables, or measure consumable use so reordering can happen
automatically. For example, an automatic milk dispenser with built-in sensors can
measure the amount of milk remaining in its container and place an order before
the milk runs out. Interestingly, device makers can start using DRS with as few as 10
lines of code.10
Acquirers need to develop a business model to tap into this payment
market and other value-added services associated with it.
Predictive Analytics
& Maintenance
Security &
Validation
Customer Personalization
Basedon Environment
Process
Optimization
Behavior Tracking
Customer Authentication
Identification Methods
Utilizes machine and location/environment sensors to better
understand operational requirements (service, replenishment, etc.).
Uses data from location/environment sensors to further personalize
the customer experience; for example, how long did they wait in line?
Employ environment and machine sensors to better understand and
respond to the collective behaviors of a customer.
Expand customer authentication methods through the integration
of sensor-based IoT solutions, such as smart watches.
Leverage machine and location/environment sensors to understand
and prevent security and/or fraud incidents.
Use environment and machine-level data collected from IOT sensors
to understand and improve operational and customer processes.
The Smart ATM
Figure 5
Figure 6
The Smart Kiosk
A Better & Faster
Buying Experience
Digital Gifting, Rewards & Loyalty
Video Conferencing &
Service Transactions
Instant Product Enrollment
Increased Customer
Engagement & Brand Loyalty
Campaign
Commerce & Services Anywhere
Engaging & Personalized
Integrated Experience

Augmented Reality
Impending IoT payment trends include the use of augmented reality (AR) and
virtual reality (VR) technologies. Consider a scenario in which a consumer uses a
VR device to visit virtual stores; browse aisles and sample merchandise; then pay
with their smartphone or another IoT-connected device — all without leaving the
virtual world. With the advent of the IoT, companies should be able to apply AR and
VR-related machine thinking to gather payment-related insights from the massive
amounts of data generated by smart devices.
Blockchain
New machine-to-machine (M2M) and peer-to-peer (P2P) payment methods,
including the cryptocurrency known as Bitcoin, are already staking their claim.
Payment to a recipient (e.g., service provider) takes place when a prescribed set
of conditions are met. The power of scriptable payments complements the intel-
ligence of connected devices. Blockchain start-up Ethereum extended its reach into
the IoT market by providing a decentralized virtual machine capable of executing
peer-to-peer contracts using a crypto asset called Ether.11
APIs are simplifying the amalgamation and connections between connected devices,
retailers and payment providers. The security measures of card networks in an open
Internet domain can be made nearly impregnable with blockchain technology, which
makes it possible to maintain an accurate, immutable record of transactions – adding
another layer of IoT payment transactions and strengthening trust among all parties.
Countering Fraud
Fraud continues to be among the biggest threats to financial institutions.12
Even
with numerous technological advances such as EMV, the industry has not been able
to create an impenetrable environment.
Examples of alternate payment types that might stand up to the persistent threat
of fraud include:
Injectables
PositiveID, formerly known as VeriChip Corp., is a leading healthcare company in
the U.S. It has made heavy investments in creating and testing syringe-injectable
microchip implants for humans that can be used for cash and credit card transac-
tions. This mode of payment would not only be fraud-proof, but also act as a barrier
to identity fraud, since the device itself would be biometric in nature.
Implantations
The U.S. Food and Drug Administration (FDA) approved RFID chip implantation, a
technology that is already being adopted in other countries, including Spain.13
These
half-inch implants are useful payment methods that can help people avoid long
lines and pay for beverages at a few exclusive clubs.
Fraud continues to be among the biggest threats
to financial institutions. Even with numerous
technological advances such as EMV, the industry has
not been able to create an impenetrable environment.

The emphasis on customer monitoring is a direct result of
increasing incidents of online fraud and the ever-present
possibility of hacked computer systems, especially those
of retailers (in a card-not-present environment). The
question is, will consumers be willing to replace their web
site login data, credit cards, etc., with an embedded chip
under their skin?
The use of injectables and implantations is a few years
away from large-scale adoption, and their impact on the
payments space isn’t a near-term concern. However,
authorizing a transaction with a “selfie” is something that is already practiced.
The industry’s consistent focus on technology innovation makes it essential for
acquirers to prepare for the use of the IoT in biometrics, injectables and implanta-
tions to counter the threat of fraud.
Words to the Wise
Consumer Privacy
With sensors embedded in human beings, objects and places, the entire physical
world is becoming orchestrated, intelligent, contextual and traceable. On the flip
side, these capabilities are vulnerable to significant privacy and security loopholes.
A recent Altimeter Group survey of 2,062 U.S. consumers regarding IoT privacy
found that at least half of respondents expressed extreme discomfort with potential
encroachments of their privacy, as well as the use and sale of their data in the
public space.14
These findings should be viewed not only in the context of citizens’
concerns about the confidentiality of their data, but also as an opportunity to
develop and build stronger, lasting customer relationships.
That said, the Internet of Things poses some real risks to consumer privacy:
• Greater security exposures due to data-sharing across all connected devices.
• Ubiquitous data collection.
• The potential adverse consequences that may result from unexpected use of
consumer data.
These exposures undermine consumer trust – making it extremely important for
merchant acquirers and other payments players to take the necessary steps to
assure consumer privacy and security:
• Build security into devices from the outset using techniques such as security
risk assessment, rigorous security testing, smart defaults and encryption.
• Reduce data by collecting the minimal amount required for a specific purpose,
and thereafter ensure its safe deposition. (This concept conflicts with the known
benefits of big data, and is subject to further scrutiny).
• Assure that consumers give consent to collect and/or use their data.
Accommodating Colossal Data Stores
The Internet of Things will have a major impact on data-storage requirements,
given that both personal (consumer-driven) and enterprise data will have to be
stored. Big data is changing the way companies adapt to, scale to and analyze
large, fast-moving streams of ambiguous data. Key verticals, such as healthcare
and financial services, are already addressing this challenge. The role of IT admin-
The question is, will consumers
be willing to replace their web
site login data, credit cards, etc.,
with an embedded chip under
their skin?

istrators will also evolve – requiring them to quickly figure out how to store and
protect incoming data while making it accessible. Physical capabilities exist to
meet the data-storage requirements for the Internet of Things, but managing
the data is an entirely different problem. Unlike the current trend of centralized
storage, organizations may need to store IoT data in distributed sites, then extract
relevant data to a central site for downstream processing.
An Optimal Approach to IoT Adoption
IoT payments can range from traditional e-commerce/m-commerce to payment
apps, near field communications, sensors and tracking devices. The acquirer system
should be able to accept payment from all of these sources and process them effi-
ciently and securely under current regulatory standards. Figure 7 below shows the
payment value chain from an acquirer perspective.
Acquirers will need to consider the impact on the key processes that are necessary
for IoT enablement:
Interface/API Management
Developing APIs for the Internet of Things has many advantages. For example,
acquirers will be able to process more transactions. And by integrating the entire
range of IoT products and platforms via APIs, they will have the opportunity to
generate additional revenue through subscription models.
Open APIs are required in order to read, send and access information among the
connected devices and the server. However, designing open APIs at all levels of
the IoT ecosystem, developing standardized formats for describing data generated
by IoT devices, and allowing for the integration of data originating from various
domains and providers remains a challenge.
Figure 7
The Payment Value Chain
Card
Check
Wallet
Payment
Instruments
POS
ATM
Phone/
IVR
Mobile
Internet/
IOT
Account
Setup
Payment
Initiation
Authentication &
Authorization
Clearing & Settlement
Net Settle
Liquidity
Management
Fund Transfer
Statement
Accounting
Reconciliation
Capture
Validation &
Enrichment
Fee Calculation
Posting
Network
Interchange
Account
Maintenance
Fraud & Risk
Management
Security, Audit &
Compliance
Exception
Management
BI &
Reporting
Interface
Management
Customer
Service
Fulfillment Services

When it comes to making or accepting payments from IoT devices, the following scenarios apply:
• Customers make payments from their own IoT-enabled devices. This can be browser- or app-
based. The transactions will be treated as typical card not present (CNP) transactions – subject to
compliance with relevant security regulations. IoT device manufacturers make software or hardware-
level (e.g. NFC, eSE15) changes to enable payment and may be required to go through compliance
certification (e.g. Visa Ready16) if applicable. Acquirers need to provide payment APIs that mer-
chants or app developers can embed in their platform, which will enable users to make payments
from all of their smart and IoT-based devices. The API would connect to the acquirer gateway for
payment processing. Additional opportunity for acquirers lies in IoT device certification with pay-
ment associations (e.g., Visa).
• Customers make payments from an acquirer-operated smart IoT kiosk or vending machine. To
support these transactions, acquirers will need a gateway to an API-based connector for payment
hardware installed on the IoT device. This will require partnering with a hardware provider that can
build the right API to accept payments.
Acquirers will also need a way to identify these transactions as separate IoT transactions for differential
processing, billing, reporting, etc.
Account Setup & Maintenance
Merchants that choose to accept transactions from IoT-enabled devices will want to have this feature
enabled for them. The service provider should indicate the subscription model as well as the boarding
system, which requires capturing and passing on this information for subsequent processing (e.g.,
authorization, clearing, settlement).
Authentication, Authorization & Data Capture
When it comes to payments, it is important to remember that people’s money is at stake. Therefore,
acquirers must have control of actual payments in terms of authentication and authorization. Autho-
rization data from gateway APIs for all IoT devices will have to be reformatted to industry-standard
formats. This could involve additional data elements, depending on the compliance guidelines (e.g., EMV
tokenization) and acquirer-specific reporting capability.
Interchange Fees & Compliance
Transactions originating from IoT devices will oblige acquirers to make changes to their back-office
processing to comply with regulatory mandates covering IoT payments. For example, Visa has extended
its Visa Ready program for IoT payments, and will allow partners to implement EMV tokenization
standards for such transactions.
Exception Management
Dispute processing will be impacted by regulatory standards, which can change periodically. Acquirers
need to continually update their systems to remain compliant.
Business Intelligence, Reporting & Analytics
There will be a wealth of data generated from IoT transactions – compelling acquirers to employ
analytics to generate actionable insights for merchants as a value-added service. IoT data can also be
used for targeted marketing and promotions.
Merchant Education
Merchants will have apprehensions and uncertainties during the various stages of IoT adoption.
Therefore, from the acquirer’s point of view, merchant education and change management will assume
an important role. This includes teaching merchants how to properly capture IoT-enabled transactions
and comply with rules and regulations.

Putting IoT Payments in Context
Acquirers’ processes and back-end systems may not require major
changes, since transactions generated from IoT devices should
be treated like others. However, acquirers will need to add data
elements in order for IoT payments to comply with regulatory
standards and support additional business intelligence (BI) and
reporting.
The Internet of Things presents two major challenges: standardiza-
tion and security. This includes standardizing IoT protocols being
used on top of existing architecture models. The good news is that
payments are not particularly affected by the demands of stan-
dardization, and even basic security issues can be overcome. The
payments world already has a robust set of controls that can be
plugged into any transactional scenario; the key issue is more about
how to connect those devices to payment gateways.
The Road Ahead
Merchant acquirers face immense competition from new fin-tech players and
established technology purveyors alike. As quality, simplicity, security, speed and
multichannel consistency separate leaders from laggards, innovative products and
services can open a world of possibilities for traditional acquirers and others across
the payments processing space.
A new world is emerging where people will manage all of their payments-related
data from a card, contactless, connected devices or even a biometric chip. The pro-
liferation of mobile devices and consumers’ increasing need to remain connected
quickly and safely – and have fast, easy and safe access to places and informa-
The payments world already
has a solid set of controls
that can be plugged into any
transactional scenario;
the issue is more about
how to connect devices
to payment gateways for
executing payments.
Figure 8
Quality
Failure Not
Tolerated
Personalization
Understanding the Individual
Security
Creating Customer
Confidence
Participation
The Active Customer
Sustainability
Environmental
Awareness
Integration
Capitalizing on
Connections
Multichannel
Anywhere. Anytime.
Any Device
Mobility
No Gaps Allowed
Immediacy
Now or Not At All
Simplicity
A Requirement
for Acceptance
Simplicity
The Attributes of a Winning Payments Play

tion paves the way for merchant acquirers to sharpen their competitive edge with
payment options that suit the “connected life.”
The Internet of Things will provide a much-needed boost to traditional payment
players and acquirers – allowing them to win and win back loyal customers and
counter threats posed by non-traditional, nimble-footed competitors. Considering
that the focus of newer payments players is to innovate and captivate customers,
merchant acquirers will need to fall in line and set their sights on developing appli-
cation protocols and tools that support new and innovative modes of payments and
provide customers with a rich, consistent omnichannel experience.
Footnotes
1 EMV stands for the first initials of Europay, MasterCard and Visa, the three
companies that created the standard. The U.S. is the last major country to adopt
EMV chip technology in its payment cards. http://www.northbaybiz.com/General_
Articles/General_Articles/In_the_Cards.php.
2 “25 FinTech Startups That Expanded Globally Despite Regulations & Other
Problems,” https://letstalkpayments.com/25-fintech-startups-that-expanded-
globally-despite-regulations-other-problems/.
3 MasterCard IoPT program press release. http://newsroom.mastercard.com/
press-releases/mastercard-launches-new-program-that-can-turn-any-consumer-
gadget-accessory-or-wearable-into-a-payment-device/.
4 Card Fraud Worldwide, The Nilson Report, October 2016, ISSUE 096. http://www.
businesswire.com/news/home/20150804007054/en/Global-Card-Fraud-Losses-
Reach-16.31-Billion.
5 “Credit Card Fraud and ID Theft Statistics,” September 16, 2015. www.creditcards.
com/credit-card-news/credit-card-security-id-theft-fraud-statistics-1276.php.
6 “Gartner Identifies the Top 10 Strategic Technology Trends for 2016,” October
2015. http://www.gartner.com/newsroom/id/3143521.
7 “Two In Five Americans Will Use Mobile Wallets By 2017,” January 9, 2016. http://
www.businessinsider.in/Two-In-Five-Americans-Will-Use-Mobile-Wallets-By-2017/
articleshow/28598110.cms.
Quick Take
• Provide developer-friendly APIs so merchants and
device-specific app developers can easily process
payment transactions from all types of consumer
devices and gadgets.
• Leverage open APIs and standardized data formats
to integrate processing systems with transactions
originating from the IoT network.
• Utilize the power of big data to support merchant
requirements and generate actionable insights from
the volumes of transactions originating
from IoT devices.
• Provide merchants and app developers
with the option to use pay-per-use or
subscription models to access processing
platforms through the APIs.
• Establish a dedicated change management team to
educate merchants on the pros and cons of the IoT.
• Address security-related challenges.
Merchant acquirers looking to employ the Internet of Things
should consider the following:

8 “How the Next Evolution of the Internet Is Changing Everything,” CISCO,
April 2011. http://www.cisco.com/c/dam/en_us/about/ac79/docs/innov/IoT_
IBSG_0411FINAL.pdf.
9 “Monetizing Mobile Apps: Striking the right balance,” McKinsey Quarterly, June,
2014. http://www.mckinsey.com/industries/high-tech/our-insights/monetizing-
mobile-apps.
10 Amazon DRS. https://www.amazon.com/oc/dash-replenishment-service.
11 Ethereum project. https://www.ethereum.org/.
12 Top Fraud Risks for Financial Institutions in 2016. https://securitytoday.com/
Articles/2016/01/27/5-Top-Fraud-Risks-for-Financial-Institutions-in-2016.
aspx?Page=1.
13 RFID Implantation in Barcelona. http://news.bbc.co.uk/2/hi/technology/3697940.
stm.
14 Altimeter Group Survey of Privacy in the IoT. http://www.altimetergroup.
com/2015/06/.
15 eSE (embedded secure element) is a tamper-proof chip available in different sizes
and designs that can be embedded in any mobile device to ensure safety of the
data stored.
16 Visa Ready program for IoT. https://usa.visa.com/visa-everywhere/innovation/
visa-brings-secure-payments-to-internet-of-things.html.
References
• “Gartner Says by 2016, 25 Percent of the Top 50 Global Banks Will Have Launched
a Banking App Store for Customers,” Gartner Newsroom, June 4, 2014. http://
www.gartner.com/newsroom/id/2758617
• “Era of Mass Customization in Banking,” Bank Innovation, April 17, 2014. http://
bankinnovation.net/2014/04/era-of-mass-customization-in-banking/
• “Monetizing mobile apps: Striking the right balance,” McKinsey Quarterly,
June, 2014. http://www.mckinsey.com/insights/high_tech_telecoms_internet/
monetizing_mobile_apps
• “A key focus of ASB’s API move is addressing real issues in corporate, commercial
and rural banking, executive says, in ‘bridges not walls’ move,” interest.co.nz,
October 21, 2014. http://www.interest.co.nz/business/72519/key-focus-asbs-api-
move-addressing-real-issues-corporate-commercial-and-rural-banking
• “Open API for Bank Apps: Can Credit Agricole’s Model Work Here?” American
Banker, July 29, 2013. http://www.americanbanker.com/magazine/123_8/open-api-
for-bank-apps-can-credit-agricoles-model-work-1060535-1.html
• “Samsung and Visa Take NFC Mobile Payments Global,” Mashable, February 25,
2013. http://mashable.com/2013/02/25/samsung-visa-nfc/
• “Amazon to move into P2P and in-store payments,” Finextra, January 30, 2014.
http://www.finextra.com/news/fullstory.aspx?newsitemid=25675
• “Alternative Payments and the Internet of Things,” FIS Payments Leader,
September 18, 2014. http://www.paymentsleader.com/alternative-payments-and-
the-internet-of-things/
• Opening Remarks of FTC Chairwoman Edith Ramirez on “Privacy and the IoT:
Navigating Policy Issues,” International Consumer Electronics Show, January 6,
2015. https://www.ftc.gov/system/files/documents/public_statements/617191/1501
06cesspeech.pdf

About the Authors
Arijit Mukherjee is a Business Analyst in Cognizant’s Banking and Financial
Services Payments Practice. He has worked in the IT industry for over 11 years,
leveraging strong development and strategic planning skills with deep knowledge
of the payments business. He has worked in several strategic engagements for
key acquirers in North America and is also actively involved in business model
analysis and process design activities for the practice. He can be reached at
Arijit.Mukherjee@cognizant.com | LinkedIn: https://www.linkedin.com/in/arijit-
mukherjee-ab442436.
Soumya Das is a Delivery Manager within Cognizant’s Banking and Financial Services
Payments Practice. With over 13 years of industry experience, he possesses strong
program and delivery management skills combined with in-depth knowledge of the
banking and financial services domain. He has successfully managed end-to-end
delivery of several key engagements and is also actively involved in business
development activities for the business unit. He can be reached at Soumya.Das3@
cognizant.com | LinkedIn: https://www.linkedin.com/in/soumyad1.
Sanjoy Anand works within Cognizant’s Banking and Financial Services’ North
America Payments Practice and has spent over 17 years in the payments business.
He has worked at Cognizant since 1998 and has served in several roles from
development through project, program and delivery management. He is currently
a Program Manager for a leading payments services customer in the U.S., and
manages large program implementations in the U.S., Europe and LATAM. He can
be reached at Sanjoy.Anand@cognizant.com | LinkedIn: https://www.linkedin.
com/in/sanjoyanand.
Vijay Venkataraman is a Practice Leader within the Connected Ecosystems Lab in
Cognizant’s Global Technology Office. With over 20 years in leadership roles for
technology practices such as enterprise content management, portals and cloud, he
has provided solutions for diverse industry verticals such as banking and financial
services, insurance, healthcare, manufacturing, logistics, and energy and utilities,
among others. Currently, he leads platforms, solutions and consulting initiatives
focusedonhelpingcustomerssolvetheirbusinessproblems–leveragingtheIoT,cloud
and related technologies. He can be reached at Vijay.Venkataraman@cognizant.com
| LinkedIn: https://www.linkedin.com/in/vijay-venkataraman-96620766.
Pushpendu Gupta is part of the Cognizant Business Consulting team’s Payments
Practice. Through his rich experience across diverse client engagements, he brings
valuable industry insights and perspectives in business functions. He is an integral
part of the consulting team driving digital initiatives, and works closely with many
of our large clients – helping them define and build industry-y relevant offerings
and services. He can be reached at pushpendu.gupta@cognizant.com | LinkedIn:
https://www.linkedin.com/in/pushpendu-gupta-70a6a92.
• “The Six Things That Will Define Payments In 2016”, PYMNTS.com, January 4,
2016. http://www.pymnts.com/news/mobile-commerce/2016/the-six-things-that-
will-define-payments-in-2016/
• “The connected car: Visa looks ahead, Visa. https://usa.visa.com/visa-everywhere/
innovation/visa-connected-car.html

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© Copyright 2016, Cognizant. All rights reserved. No part of this document may be reproduced, stored in a retrieval system, transmitted in any form or by any means,
electronic, mechanical, photocopying, recording, or otherwise, without the express written permission from Cognizant. The information contained herein is subject to
change without notice. All other trademarks mentioned herein are the property of their respective owners.
Codex 2042
About Cognizant Banking &
Financial Services
Cognizant’s Banking and Financial Services business unit, which
includes consumer lending, commercial finance, leasing insur-
ance, cards, payments, banking, investment banking, wealth
management and transaction processing, is the company’s larg-
est industry segment, serving leading financial institutions in
North America, Europe, and Asia-Pacific. These include six out
of the top 10 North American financial institutions and nine out
of the top 10 European banks. The practice leverages its deep
domain and consulting expertise to provide solutions across the
entire financial services spectrum, and enables our clients to
manage business transformation challenges, drive revenue and
cost optimization, create new capabilities, mitigate risks, com-
ply with regulations, capitalize on new business opportunities,
and drive efficiency, effectiveness, innovation and virtualization.
For more, please visit http://www.cognizant.com/banking-
financial-services.
About Cognizant
Cognizant (NASDAQ: CTSH) is a leading provider of information
technology, consulting, and business process services, dedicated
to helping the world’s leading companies build stronger busi-
nesses. Headquartered in Teaneck, New Jersey (U.S.), Cognizant
combines a passion for client satisfaction, technology innova-
tion, deep industry and business process expertise, and a global,
collaborative workforce that embodies the future of work. With
over 100 development and delivery centers worldwide and ap-
proximately 255,800 employees as of September 30, 2016,
Cognizant is a member of the NASDAQ-100, the S&P 500, the
Forbes Global 2000, and the Fortune 500 and is ranked among
the top performing and fastest growing companies in the world.
Visit us online at www.cognizant.com or follow us on
Twitter: Cognizant.

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