But the mainstreaming of AI is only possible because of machine learning. And the combination of the two holds limitless possibilities for the financial industry. So get ready for not only your spouse and kids to spend your money, but your robots too.
Origins of M2M
Up until now, M2M (machine to machine) communication was thought of as the precursor of IoT (Internet of Things). But in the future, M2M will rebrand, not as the parent of IoT, but as the actual financial transaction itself.
Today, industries are already using machine learning to discover patterns in data, construct mathematical models from discoveries and make predictions. But the real magic in machine learning isn't what it can already do, which is substantial. The real excitement is in what machine learning will do in the future.
And a disclaimer: M2M is often confused with IoT in the tech industry, but they’re not the same – at all. IoT refers to how devices speak to each other between disparate systems. While M2M is similar in function, it refers to isolated systems that don't communicate with each other. But insert AI, and these devices will not only speak to each other, as well as other systems, but they will also make their own choices. So these M2M payments are really just IoT transactions that could include a variety of scenarios, including transactions based on consumer behavior – often without our knowledge.
And a disclaimer: M2M is often confused with IoT in the tech industry, but they’re not the same – at all.
Outcome economy paves the way
In the 'outcome economy' – the world where we're charged by how far we travel, the speed we go, how much we use the device, etc. – M2M takes on new meaning, becoming the next buzz in payment types. Along the lines of peer-to-peer (P2P) and business-to-business (B2B), M2M will soon be known as 'M2M Payments,' making transactions between machines.
To give an example, the convergence of M2M payments and IoT might be just what I need to take my tennis game to the next level.
Imagine you're on the tennis court and your smart racket notices that your tennis balls have lost inflation. The racket, which has been tracking your swing performance and sending the data to your smart devices, decides to order and pay for three more balls from the auto-roving ball dispenser. Your device also determines that the auto-rover is using your favorite open source code, so it makes a small extra donation to the rover to help support future development via smart contract.
Along the lines of P2P and B2B, M2M will soon be known as "M2M Payments," making transactions between machines.
Score one for my tennis game. Oh, and this technological advancement will also dramatically change the payments industry. It's the combination of machine learning, IoT and smart contracts that produces an outcome economy. Customers will be charged by how much they use or consume. IoT will provide the circumstances for new and different purchasing opportunities.
The future is now
Today you can make life easier for people through personalized prescriptions, shopping experiences and a host of other niceties. Financial institutions already use machine learning in the fight against fraud. They verify transactions with predicted customer behavior, common fraudster behaviors and then make a determination all the way down to the individual transaction.
This also means they can target opportunities to meet consumers' needs and offer services using their preferences. Uber, Airbnb, Facebook and Amazon all use machine learning to make our day-to-day lives more convenient. They do more than use algorithms to predict preferences and behaviors; they offer real solutions to meet them.
Have you noticed that items you search for suddenly start appearing in your social media feeds or "you may also be interested in" prompts? It's not just cookies anymore – machine learning is playing more of a role. And while some find that to be an overreach, I just see it as technology at work. And this is just the beginning. More than 25 percent of engineers at Facebook are currently working with AI. Facebook has 1.79 billion users, so you can rest assured that through just this one outlet, a lot of M2M activity is about to happen.
The future for M2M payments is bright and will be even more common as IoT, M2M and smart contracts become mainstream in the payments industry. Integrating our devices with user experience apps like mobile wallets, healthcare and others will thrust participating financial transactions into the forefront. And when that happens, M2M will become just as common a term as P2P and B2B.