In 1994, Amsterdam launched an initiative entitled De Digital Stad — The Digital City. Unfortunately, this programme was discontinued in 2004. Even so, it is widely hailed as the beginning of smart cities as we know them today.
Smart cities have come a long way since the mid-90s. In this time, they have evolved from technology-driven havens of futurism to citizen-led endeavours of co-creation, grounded by a concern for equality and social inclusion. They show rapid growth across the globe, too. Between now and 2029, these cities are expected to show a CAGR of almost 10%.
Such rapid progress will not come about in a vacuum. The urban FinTech industry is an example of one market that must rise to meet this new challenge. There is a clear need for FinTech solutions to support smart infrastructure. This will make life more convenient for residents and improve their quality of living.
This article will explore several new types of digital payments used in smart cities. It will assess their potential and consider their impact on urban life, city services, and infrastructure. We will also consider the changes brought on by these revolutionary financial technologies.
As our technology becomes more advanced, smart cities will become increasingly prevalent. They can already be found around the globe, including in Barcelona, Singapore, and Tokyo.
For these cities to operate as smoothly as possible, systems for digital payments must be seamlessly integrated into existing urban and financial infrastructure. This can be done by incorporating high levels of automation and minimising cash usage. Changes like these are more convenient and won’t interrupt the lives of residents. This will be most noticeable in areas like public transport and parking services. In these situations, quick payments can help minimise delays and improve the overall experience.
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There are a variety of digital payments available for smart cities, but they can be broadly categorised into four groups:
Here, we’ll explain what these four types of transactions are, giving examples of how they can best be put to use.
Contactless transactions are one of the most popular types of digital payment methods, especially since the COVID-19 pandemic. IA study from 2022 shows that half the transactions in the world are contactless. This is because QR codes and NFC allow speed and convenience.
These types of digital payments are often used on public transport. For example, they allow people to purchase bus tickets with a single tap of their bank card or smartphone. They are used in retail, too, providing customers with payment options beyond cash or chip-and-PIN.
IoT solutions represent the future of contactless payments. By integrating physical, electronic devices and digital transactions, IoT technologies allow for convenient, efficient payments without the need for human interference. Many people confuse contactless and IoT transactions. Basically, it is the lack of a need for human input that distinguishes the two.
In a city that uses this technology, you will automatically make a payment if you drive onto a toll road. You won’t have to worry about making it manually. Likewise, if you park next to a smart meter, you will automatically be billed for parking. This means you won’t have to take the time out of your day to do it yourself.
An increasing number of people choose to manage their spending on the go using mobile payment processing services. You have probably used such mobile payment apps yourself in the past. Some of the most popular include WeChat Pay, Google Pay, and Apple Pay. Respectively, these have 1.2 billion, 150 million, and 640 million users.
Mobile payment apps make it easier to manage various payments in one place. This makes them ideal for citizens of smart cities. Transportation, bike rentals and other utilities can be paid for in one location. Mobile wallets allow you to store multiple bank cards, as well as vouchers, boarding passes, and more.
There are also digital payment methods that charge fees based on the user’s location by using GPS. These can be used to automatically charge for parking, toll roads, or access to services.
In smart cities, geolocation payments have a few different uses to boost efficiency. Automatic parking payments could take effect when cars enter a parking zone. Or, toll payments could be charged when one enters a given area. This allows residents seamless, convenient access to the city’s amenities.
The integration of digital payment solutions into smart city infrastructure promises to streamline daily living and provide citizens with access to more efficient services. Additionally, they can help reduce the financial burdens placed on the local government. In this section, we will consider three sectors and look at how this tech is integrated within them.
By minimising delays, smart transportation helps to decrease congestion and improve mobility. Such technology improves the overall efficiency and efficacy of the public transit system. Contactless and IoT transactions are a big part of this.
Integrating smart payment technology into both transport management systems and mobile apps allows travellers to make payments quickly and easily using contactless cards, smartphones, or even wearable devices like smartwatches. These digital solutions streamline the ticket-buying process. Commuters will no longer have to fumble about with change or wait for physical tickets to be printed. With one tap of their card or smart device, they’ll be ready to go.
With the help of IoT technology, cities can introduce smart parking systems with space reservation facilities, eliminating the headache of whether or not you’ll be able to find somewhere to park. This will be a useful feature for everyone, but especially for elderly or disabled people. Such smart parking systems will also allow for automatic billing, giving drivers one less thing to worry about.
Smart city citizens will be able to make the most of these features through their mobile phones. Apps for payment and parking will allow them to settle bills and reserve spots when and wherever they like.
Keeping on top of bills can be difficult. This is yet another aspect of daily life that smart cities attempt to make simpler for residents. These towns have introduced mobile apps citizens can use to pay for various utilities like gas, electricity, and water. From these applications, they can also check their usage and receive service updates.
Smart cities are also introducing automated digital payment systems for utilities and city services by putting in place smart meters and integrating them with payment platforms. This makes things a lot easier for residents. Citizens won’t have to worry about accidentally missing a payment and having their access to such facilities blocked.
We have already touched on the impact these new payment methods might have on urban spaces and city services. Additionally, we’ve provided some examples of how they’ll transform citizens’ daily lives. Shortened service queues, minimised transit delays, and reduced reliance on physical cash are a few such examples.
Moving towards a digital economy powered by IoT technology serves local governments as much as city residents. Firstly, this transition will help reduce expenditures in the long term. Reduced reliance on cash leads to lower cash-handling and other administrative financial costs. At the same time, the implementation of smart meters and IoT devices can assist in logistics and planning. They do this by providing decision-makers with key actionable insights in the form of real-time transaction data.
For example, through the use of IoT systems, city managers can chart peak travel times and citizens’ movement patterns. With this data, they can plan routes and schedules and deploy more buses during busy periods.
Despite their many benefits, these new digital payment methods and their integration into smart city infrastructure come with many challenges. These difficulties begin with their introduction.
City infrastructures are usually composed of a wide range of service providers. Each of these uses its own payment system. Before contactless, IoT, and other revolutionary payment technologies can be introduced, these systems must be unified and standardised. This will minimise confusion and frustration for users. An example of this in practice is Singapore’s NETS prepaid card. A single card can be used on public transport, in retailers, and for parking.
Another potential challenge comes in the form of cybersecurity threats. The more information collected and shared on a given platform, the greater the risk of breach — and the more disastrous the outcome. On top of this, residents may have some concerns about how their data is used in the first place. These concerns highlight the need for a reliable security system with end-to-end encryption. They also show the importance of regular third-party auditing of data protection compliance.
In spite of these difficulties, it seems likely that more and more cities will adopt new payment methods. At the very least, recent trends all seem to point in this direction. Countries all around the world are looking to adopt central bank digital currencies. IoT device adoption is at an all-time high and is expected to grow to 13% by the end of the year. In other words, the stage is being set for our transition to fully automated, autonomous digital payments systems.
For smart cities to operate at their most efficient, we must adapt payment systems to meet their needs. While this will prove a challenge, it still promises to be a worthwhile endeavour. It will provide city residents with convenience and ease, boosting quality of life. By reducing cash handling and eliminating human interference, cities will be able to operate efficiently. Such changes will also lessen the financial burden of outdated administrative systems.
Smart payment systems still require further development and investment, but they offer many potential advantages. Furthermore, they have already helped create efficient, sustainable urban environments around the world. With this in mind, these digital methods seem to be worth the time, effort, and investment.
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