In a keynote presentation at Merchant Payments Ecosystem 2024 in Berlin, Hemlata Narasimhan, president of Elavon explored what a smart city could look like in 2030, using Venice, Italy as a case study.
The presentation started with an AI of Venice as a smart city speaking to the audience from the future, explaining how it can charge people automatically for congestion, allow tourists to book and pay for gondola rides using biometric technology, and control autonomous electric vehicles as they drive around the city and charge.
This idea of a smart city encompasses payments of all kinds, from transport to food, retail, leisure, and more using data of facial recognition and embedded digital payments to charge consumers without having to disturb the user. Narasimhan explored the possibility of living in a city where payments are embedded within experiences and municipal services; restaurant bills, commute fares, and retail shopping, all paid for automatically.
“If someone enters a station or a museum and pays with biometric technology like facial recognition, what sits behind that interaction is a lot of data on identity, age verification, and available funds that then authorise the transaction. So something that simple and seamless, which is what our customers are asking for, is actually supported by an incredible amount of complexity in the background, both again in terms of data and in terms of technology, and each of these experiences now generate more data.”
She highlighted how transactions are authorised by data to protect the consumer from unwanted charges – and that is the future of a smart city. Digital identity can be incorporated into wallets that make experiences more seamless, which can make life easier for people with disabilities or health issues.
Narasimhan concluded that this future is a possibility, and it can make a difference in customer experience, sustainability, and financial inclusion. However, there is a need for a network of partners to map out the level of data required to keep a smart city operating at full capacity.
IoT facilitating automated payments
Bas van Donselaar, head of PaymentsGenes Consultancy, made a presentation on what is possible with machine-initiated transactions. He spoke along the same lines as Narasimhan, explaining how automated transactions are incoming, using the Internet of Things (IoT).
Van Donselaar gave examples of using IoT for charging payments when taking electric vehicles to charging stations, using geolocation to charge commuters transport fares, and road pricing to manage congestion in cities.
He also highlighted that there are risks to these transactions and kinks that still need to be figured out to create a smart city: “The payments in all use cases we showed were asynchronous, meaning that you are not actually paying at the time of the transaction. This brings risks of course, that need to be solved. Secondly, level three data is particularly hard to embed in actual transactions. You can share this among data networks and such, but embedding the actual data in transactions is challenging. Third, all of the examples we showed require some sort of upfront consent. You can't just walk into the store today and walk out with the stuff you want to buy. You need to have an incentive contract before you can actually start having this experience.”
He concluded that a framework needs to be created that can embed all the data required and protect the sensitive data in transactions to generate a seamless and protected ecosystem of automated payments.
Smart cities, connected devices, and digital payments
Carmela Mesquita moderated a panel titled ‘Smart cities, connected devices, and digital payments’ including experts Narasimhan, van Donselaar, Paul Pike from Fan Engagement Group, and Andrew Vorster of The Banking Scene.
Commenting on the possibilities of smart cities that were explored in the presentations, Vorster raised concerns about how data can be used and shared across systems without customer consent. He cited the example of commuters in Milan, many of whom opt to drive into the city as they do not know how much they would be charged if they used public transportation. Consequently, the municipal authorities are looking to develop a ticketing system and possibly implementing a fare cap so that commuters are not overcharged. However, it is a worry when people are being charged for services automatically if they do not know the cost.
Narasimhan stated that leveraging payments data can drive efficient decision-making in smart cities and that it is crucial to meet the consumer where they are. “I don't think we should fight what consumers want to do, because I think that's a losing battle. The real challenge is how to equip consumers with the right data they need to make informed choices. It is definitely important to provide fare comparison. There are ways today where you can see the cost of the trip. We need to provide that data upfront so consumers can make that choice. You have to meet the consumer where they are, and you have to help them make the choices in a way that's most efficient as possible.”
Van Donselaar spoke on how interoperability and moving forward with consent to share data across ecosystems are significant challenges. Real-time payments based on a non-payments device still need to be developed.
He further detailed how data privacy when it comes to biometrics still has a long way to go to be secure, private, and properly regulated: “I do think we as a sector have an important question around privacy and accessibility. Biometric authentication is very personal very sensitive data that is being stored and shared. I find it difficult to see where you draw the line of what's acceptable and what's not acceptable. I think one of the core principles to be would be that accessibility of public transport. For example, for charging points for vehicles, even if a consumer is not willing to share certain data types, they should still be able to access those services. The journey may not be as frictionless as when they decide to share their data, but I feel it should always be an option to not share your data.”
Vorster explained the potential of payments data to change consumer behaviour when it comes to smart cities and using public transport: “If you use public transport for three days a week, they can give you a free entry ticket for your family to the museum over the weekend. If you plan a weekend trip away, they can incentivize you in some way to move out of their cars into public transport. All by using payments as a mechanism to change the user behaviour and collaborating across multiple different communities. Now to me, that is a fascinating way of bringing payments data to life in a smart city setting.”
Looking at the example of festivals and major events, Pike explained that a problem within the industry is the lack of relationship between promoters and attendees, where festival owners are missing out on gaining information and learning the incentives of the consumer. He pointed out that intermediaries of outside agencies and commercial partners take away from potential revenue generation.
Vorster concluded the session by explaining that with the functionalities of GenAI, we are looking at a future where digital wallets can be taken a step further to become smart wallets, in which AI is integrated into payments systems and your wallet can make your payment decisions for you.