Tuesday, November 11, 2014
A new opportunity is forming for the payments industry in the burgeoning market for multifunction, Internet-connected smart TVs. It's a market driven by consumers who watch less and less network and cable TV and instead stream content online, whether on a desktop, a tablet computer or, more commonly now, a smart TV. Leveraging payment functionality online via smart TVs may thus be the next big delivery channel for payment providers.
Boston-based market research firm Strategy Analytics said in its Smart TV Forecast that 76 million smart TVs were shipped globally in 2013, up by 55 percent from 2012. Western Europe is the biggest market so far for smart TVs, according to the research. By 2017, Strategy Analytics said, virtually all mid- to high-end TVs will ship with some form of Internet capability.
However, the "smart" capabilities of connected TVs are being underutilized by consumers; Strategy Analytics reported that only about 50 percent of smart TV owners in the United States and Europe utilize that online functionality. "[S]o vendors must continue to add compelling applications and services to entice consumers to utilize their platforms," said Strategy Analytics Analyst Eric Smith.
One such vendor is Paymentwall Inc., a global e-commerce service provider headquartered in San Francisco. The firm is an aggregator of online solutions, including an international payment gateway, a mobile carrier billing platform and an alternative prepaid platform. Paymentwall has offices in nine countries, including China, Germany, Turkey and Brazil.
Paymentwall Chief Executive Officer Honor Gunday said the company has integrated all its features into a smart TV application, PW Smart TV, which facilitates payments for the online streaming of movies and other content. The solution is geared toward developers who build applications for smart TVs.
Gunday said that, in the last few years, at least 5,000 applications have been written for smart TVs from around 3,000 developers worldwide. The problem is monetizing those applications. "These developers who produce these applications on many TV platforms have to find a way to monetize the users, monetize the content, monetize the services that they provide. And they do this on their own," Gunday said. "But what Paymentwall enables them to do right now is integrate Paymentwall on any TV so they can process a payment."
Paymentwall's user interface (UI) allows consumers to choose content and pay for it by entering a credit card number, for example, using the numeric keys on the TV's remote control. "They don't have to type addresses," Gunday said. "They don't have to type in other details. Once that's done, our system tokenizes the credit card details [and] saves it in our vault."
The entry of the card number is a one-time action for consumers, Gunday added. "Our system is smart enough to recognize all the users using the TV once we store and tokenize the card details," he said. "They don't have to keep inputting the card details when they are using a credit card."
Paymentwall also allows consumers to intitate transactions with secondary mobile devices like smartphones and tablets. "Most people, statistically speaking, always have a cell phone when they are sitting on their couch in the living room," Gunday said. "They can pay on the mobile device and our system communicates directly with the TV and executes the payment on the phone, but indicates the fact that its executed through the TV via an API [application protocol interface]."
A demo of PW Smart TV is available at www.youtube.com/watch?v=NWhQ0VDEL_Q&feature=youtu.be .
Gunday said smart TV payments are akin to the traditional pay-per-view model, with consumers accessing content on TVs by paying pay-per-view providers, typically via phone. But the big difference in the smart TV realm is the flexibility of integrating payments from many providers on one multifaceted platform, according to Gunday.
The potential payment volume flowing through smart TVs is hard to quantify in this early stage in the market's development. However, consumers in the developed world still like to watch TV; Americans love it, to the tune of 8 hours per day, Gunday said, with consumers in Turkey coming in second at a daily average of 5 hours.
The demographic shift away from traditional TV watching by younger generations of consumers (and toward accessing content via mobile devices) will not dampen the smart TV market, at least for the next 10 years, according to Gunday.
Indeed, TVs are a staple of living rooms around the world and remain a strong focal point for communal gatherings to watch sporting events and movies, for instance. Additionally, smart TVs have become the hub of entertainment centers, where gaming consoles and other devices can be connected and content enjoyed on the larger screens that TVs provide.
Gunday noted that the card brands have put smart TV payments in the card-not-present category, which comes with a higher interchange rate because of the increased risk of fraud on those transactions. PW Smart TV does not employ standard customer authentication protocols, such as the 3D Secure technology developed by the card brands, because it would complicate the user interface.
"Otherwise they would have extra pop-ups happening inside the UI," Gunday said. "And once you eliminate that you are more prone to risk and chargebacks."
Instead, Paymentwall has developed its own proprietary authentication technology that leverages consumers' Wi-Fi networks to which smart TVs are connected. "The geo location and device ID of the smart TV and so on verify that it is the user that we think it is," Gunday said.
Regardless of the hurdles facing smart TV payments, it is clear the omni-channel user experience will one day advance beyond smart TVs to smart refrigerators and smart kitchens, too.
Gunday said electronics giant Samsung contacted Paymentwall to investigate adding payment functionality to one of its refrigerator lines so that consumers could purchase such goods as milk and eggs from UIs built into the units. Gunday said such a potential application is still well into the future, but achievable.
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