By Patrick Bermingham
Canadian start-ups and established business-to-business (B2B) companies alike are increasingly interested in the industrial Internet of things (IoT), with over 81 per cent of medium and large organizations adopting at least one IoT solution.
Many of these businesses, however, are missing a trick when it comes to payments. They face many challenges when designing and implementing their own IoT payments solutions, most notably serious security risks and a lack of interoperability. Just one slip-up could have a serious impact on them.
IoT payments benefits
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 only order more of those components from their suppliers, but to automatically pay for them. This could help solve many of the payments problems plaguing Canadian businesses—particularly micro- and small mid-sized enterprises—of which 48 per cent say that collecting payments from customers on time is the most problematic aspect of managing their cash flow.
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 a stakeholder-agnostic payments platform, integrated with IoT solutions, digital payment issuance and acceptance is simplified, with past and incoming transaction data captured, stored and processed in real-time. This increases payment flexibility and reduces the cost of transactions.
There are strategic benefits to improving industrial payments processes. Late payments continue to be a major issue for businesses globally, with one in ten invoices being paid late at a cost of $3 trillion a year. Moving to automated digital supply chain payments ensures that transactions are processed quickly and on time, thus improving buyer-supplier relationships.
Wise to fly solo?
But 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 do harm.
Complying with evolving industry regulations, such as Payment Card Industry Data Security Standard (PCI-DSS) is crucial for these B2B merchants. Unless their payment systems are up to standard, they risk data breaches and fraud: which can irreparably damage their brand and buyer relationships and incur heavy fines.
But compliance is complex and expensive to achieve and maintain. It requires extensive penetration testing, hours of skilled developer time and ongoing changes to internal payment infrastructure. As data breaches continue to cause national security concerns globally, it’s not worth the risk.
Integration best answer
Integrating an independent stakeholder-agnostic payments platform with IoT solutions meets these requirements, and, crucially, accepts responsibility for maintaining them, significantly minimizes these risks. They also enable B2B merchants to strengthen their offerings in two key ways:
First, best-of-breed systems combine end-to-end data encryption with tokenization, replacing sensitive data with meaningless information. This reassures buyers that even if their payment information is intercepted, it is indecipherable, therefore has no value.
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. This means that suppliers can work with more buyers, regardless of these clients’ payment infrastructures, instead of doing business with only a tiny fraction of the overall market.
The opportunities presented by IoT payments should also be considered in combination Canadian payments modernization. The new core clearing and settlement system in development will only enable real-time payments increase the amount of data travelling with transactions, thus making this the perfect time for businesses to invest in their own payment systems.
A connected payments network can improve financial processes. That’s why more Canadian buyers are looking for innovative and more reliable 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 quickly, cost-effectively and securely is a tricky path to navigate alone.
Suppliers should consider what is already available. Tried and tested third-party payment platforms can bridge the gap between buyers and suppliers, reducing costs, improving efficiency and enhancing corporate relationships.
Patrick Bermingham is CEO at Adflex (www.adflex.co.uk).