Start-ups and established companies alike are increasingly interested in the Industrial Internet of Things (IIoT), but many are missing a trick when it comes to payments, says Patrick Bermingham, CEO of digital payments specialist Adflex.
Businesses face many challenges when designing and implementing their own IoT payments solutions, most notably serious security risks and a lack of interoperability – and just one slip up could have a serious impact on a business.
So why risk it?
Traditional industries, like manufacturing, have the highest growth potential for IoT payments1. These sectors continue to rely on outdated, inefficient and insecure ways to manage their finances, so are ripe for an overhaul2. The immediately obvious benefits are operational. Specific stock levels, for example, could be set to trigger alerts in smart factories that tell the system to not just order more of those components from their supplier, but to automatically pay for them.
Automating payments increases efficiency by freeing up resources. Time intensive (and tedious) paperwork associated with procurement, such as invoice reconciliation, call-off delivery notes and future batch ordering, can be processed with minimal human intervention and maximum accuracy.
There’s also improved operational visibility. When using an integrated, stakeholder agnostic payments platform, digital payment issuance and acceptance is simplified and data about past and incoming transactions can be captured, stored and processed in real-time. This increases payment flexibility and reduces the cost of transactions.
Going beyond operations, there are strategic benefits to improving industrial payments processes too. Late payments continue to be a major issue for businesses around the world, with one in ten invoices being paid late at a cost of $3 trillion a year3. Moving away from traditional invoicing methods to automated digital supply chain payments ensures that transactions are processed quickly and on time – improving buyer-supplier relationships.
Done right, IoT payments can add significant strategic and operational value to a business. As more and more companies identify these benefits, many are diving in at the deep end and rushing to build their own industrial IoT payments systems, thinking it will bring them competitive advantage. In fact, this is more likely to bring about their downfall.
Flying solo on security
Complying with continuously evolving industry regulations such as Payment Card Industry Data Security Standard (PCI-DSS) is crucial for merchants. Unless their payment systems are up to standard, they risk data breaches and fraud which can do irreparable damage to their brand and buyer relationships – not to mention heavy fines.
Compliance with these ever-changing regulations, however, is complex and expensive for businesses to achieve and maintain, requiring extensive penetration testing, hours of skilled developer time and ongoing changes to internal payment infrastructure.
But as data breaches continue to cause national security concerns in the U.K. and across the world4, such as those that have led one of the world’s leading communications services companies to remove equipment from Chinese telecoms giants, Huawei, after concerns were raised about the Chinese firm’s presence in critical telecoms infrastructure5, it’s simply not worth the risk. Instead, integrating an independent stakeholder agnostic payments platform that meets these requirements, and, crucially, accepts responsibility for maintaining them, significantly minimises these risks.
Interoperable IoT payments with baked-in security also enable merchants to strengthen their client offering in two key ways. First, best of breed systems combine end-to-end data encryption with tokenisation, replacing sensitive data with meaningless information. This reassures buyers that even if their payment information is intercepted, it is indecipherable, and therefore worthless.
Second, by placing the burden of payments interoperability on an independent platform provider, companies can scale quickly. Agnostic platforms enable acceptance of a large variety of payment methods, from credit and debit cards to purchasing cards and even alternative payment methods (APMs). This means that suppliers can work with more buyers, regardless of these clients’ payments infrastructures, instead of doing business with only a tiny fraction of the overall market.
In a better-connected world, why go alone?
It’s clear that a connected payments network can improve financial processes. That’s why more buyers are looking for innovative ways of paying their suppliers, as evidenced by the rise in tender documents enquiring about supplier payment acceptance. But for B2B merchants, ensuring they are accepting IoT payments as quickly, cost-effectively and securely as possible is a tricky path to navigate alone.
Before suppliers risk data breaches and operational inefficiency by creating an IoT payments solution from scratch, they should consider what is already out there. Tried and tested third-party payment platforms can bridge the gap between buyers and suppliers, reducing costs, improving efficiency and enhancing corporate relationships.
The author is Patrick Bermingham, CEO of digital payments specialist Adflex.