Cars and fridges are getting smarter, and they could learn to pay their own bills next. Even Visa is exploring the IoT-driven tech.

• The internet of things (IoT) refers to the network of everyday objects that are plugged into the internet.
• And as IoT continues to mature, experts and industry leaders are exploring applications through something we all do - buying stuff.
• Visa is exploring IoT payments through cars, and it thinks cars could pay for their own parking in as soon as 12 months.
• Citi Ventures is also eyeing the space. It's backing CarIQ, a startup that's already exploring payments initiated from vehicles without needing a credit card.
• But VCs at Edison Partners caution that while the funding is there for startups launching IoT platforms, it may not happen as quickly as we'd think.
• While tech moves fast, legacy infrastructures and consumer behavior could delay IoT adoption.
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You probably have heard of the so-called internet of things (IoT). It refers to the network of everyday objects that are plugged into the internet. Think: phones, refrigerators, cars, even lightbulbs.

Talks of IoT often conjure up fears of Black Mirror-esque dystopian realities. If the things you use every day are connected and communicating with each other, it's easy to see how privacy and security become top concerns. IoT devices can collect data including location, spending habits, and health information.

It's that rich trove of data and always-watching connectivity that has caught the attention of one of the world's biggest payments players, as well as venture investors and startups.

And as IoT continues to mature, experts and industry leaders are exploring applications through something we all do every day - buy stuff. They're eyeing not only your wallet, but your car as the next opportunity to roll out IoT payments.

We talked with payments experts to learn what's possible when it comes to smart devices paying bills, and what some of the big hurdles to adoption will be.

Card network giant Visa has been investing in IoT payments for the past couple of years, Bisi Boyle, vice president of IoT at Visa, told Business Insider.

Boyle heads up efforts around connected payments and is leading Visa's charge to make sure the card network's rails are connected on the IoT. And for 2020, she's focused on rolling out invisible payments in cars.

"We saw the opportunity because of this explosion of connected devices that make up the internet of things that people use every day now" said Boyle. Cars are first on the list, she said.

The four use cases Visa is exploring with cars are fuel, parking, food, and tolls. Cars, Boyle said, will likely be the first place consumers will see IoT payments - and she predicts that capability could arrive as soon as next year.

"The idea is you're just living your life and all these payment experiences happen," said Boyle.

Take parking, for example. IoT enabled cars will be able to find open street parking and pay the meter, all without the driver needing to pull out their phone or wallet.

Visa is betting that fuel and parking use cases will surface in the 12 to 18 month range, said Boyle. And the card company has already partnered with car companies like Honda to start rolling out the tech.

Paying for parking and gas are just the beginning, though. Boyle sees drive-thru and curbside food pickup as the next step for the tech within three years.

Tolls are another area with potential, but Boyle thinks adoption will take closer to the three years. The idea is to bring the toll payments into the cars using IoT, as opposed to the existing electronic toll providers like New York's E-ZPass and California's FasTrak.

"You have to work with different governments and municipalities, so that's why that one takes a little bit longer," Boyle said.

And while these payments may be "invisible," Boyle does not see a world where machines are initiating payments without the involvement of the owner themselves.

To be sure, IoT payments will eliminate the need to take out a wallet, but users will still need to authorize payments made by machines.

"I don't mind it paying for me, but I want it to ask me first, and I want it to know that it's me," said Boyle.

"You have to design the payment experience in a way that people feel that they can trust it," she added.

Cars paying for their own gas

Like Visa, Citi Ventures' co-head of venture investing, Ramneek Gupta, is betting on cars to drive the first wave of IoT payments.

"It is a little bit nascent today - but I think there will be a lot more value creation there from the startup ecosystem-is the emergence of non-human or machine-originated payments," Gupta told Business Insider in November.

As everyday devices like cars and phones get smarter, Gupta thinks IoT payments are inevitable. "It's the natural next step," he said.

Gupta expects these machine-initiated payments to surface in the next two to three years. Citi Ventures backed an India-based startup called CarIQ, which is already exploring payments initiated from vehicles without needing a credit card.

The startup raised $5 million in a Series A in June, and in August, automotive manufacturer Varroc acquired a 74% stake.

David Becker/Getty ImagesSmart fridges may take longer to roll out given they're replaced less frequently.

Product-agnostic platforms are what some VCs are looking for

CarIQ's platform model is one way for startups in the IoT payments space, said Dan Herscovici, partner at Edison Partners. The other is a product-driven approach.

"It's a very interesting conundrum, and has lived in IoT for a long time. It's the point solution versus the platform," said Herscovici.

Home appliance manufacturer LG, for example, could create an IoT-enabled washing machine, then partner individually with repair servicing companies or payments networks.

"That's impractical," said Herscovici. "When we look at startups in the space, we're looking for people that are providing platforms or ecosystems as opposed to singular point solution ones that are agnostic to the device in which they're being inserted."

While building out a platform can be costly, the funding is out there, said Chris Sugden, managing partner at Edison Partners.

If you build it, they will fund

While large players like LG or Visa are making big pushes in IoT, winners in the space are far from being established. Sugden thinks startups, flush with VC cash, can compete.

"I think that can come from the startup world because the $50 million and $100 million and the multiples of $100 million rounds are available. That didn't actually exist in the past," Sugden said.

Sugden mentioned the so-called SoftBank syndrome - the concern around megarounds and over-funding of startups like WeWork - but with a great business model, investors are willing to provide enough capital to chase what some might see as lofty ideas, he said.

"We're seeing those things get funded now in areas where you couldn't actually get them funded to really take the market," said Sugden. "Someone else would actually frankly steal your idea before you got the scale."

Cars aren't the only use case, but it will take time

And while IoT payments may materialize in cars over the next couple of years, Sugden and Herscovici think other use cases will take longer than 10 years.

While tech moves fast, legacy infrastructures and tough-to-change consumer behavior could delay IoT adoption.

In the home, for example, appliances like washing machines are purchased and replaced less frequently than cell phones. Some of these appliances can last in the home for more than 10 years, Herscovici said.

Smart phones, on the other hand, have high market penetration and are replaced often. And that paves the way for business to use IoT payments wherever there's a smartphone present.

Amazon is exploring IoT through smartphones with the launch of its IoT-powered Amazon Go convenience stores. There are currently more than 20 of the cashierless stores open in Chicago, New York, San Francisco, and Seattle. Amazon is reportedly aiming to open 3,000 Go stores by 2021.

Using the Amazon Go app, shoppers can scan their phones to enter, take whatever they want from the shelves, walk out, and get charged automatically after they leave the store. The ceilings in the stores are lined with cameras and sensors to keep track of your virtual cart. There's no checkout, so shoppers never have to pull out their wallets to pay for their snacks.

Still, it's a long road ahead for the tech

"In fintech and financial services more broadly, and payments even more specifically, everyone thinks it's going to happen faster than it does," said Sugden.

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