The future of payments: Programmable payments for the Internet-of-Things (IoT)

Philipp Sandner
4 min readJul 23, 2021

Digitization is taking hold of entire industries, including in Germany. The area of the “Internet of Things (IoT)”, in particular, promises revolutionary, new types of business models. In this context, the term IoT refers to the increasing connection of machines and devices to the Internet. These devices are equipped with digital identities to communicate with each other and execute processes autonomously without human intervention. This trend will become increasingly relevant in the future. For example, the total number of IoT devices is expected to rise to 75 billion by 2025, according to estimates. — Maximilian Forster, Jonas Gross, Anja Kristina Kamping, Serkan Katilmis, Dr. Mario Reichel, Prof. Dr. Philipp Sandner, Philipp Schröder

Download the English paper here (German version here).

In this context, the distributed ledger technology (DLT) will play a key role. A DLT can be used for the underlying IoT business models as a trustless, standardized, and highly automated infrastructure on which IoT devices can act autonomously. However, to realize the full potential of the digitization of the industry and the IoT, the entire payment process must be optimized and adapted to the needs of IoT payments. Consequently, the payments associated with these new business models must be processed efficiently, automatically, and in real-time. In this context, it is essential to enable programmable payments. The current conventional SEPA payment system cannot meet all these requirements, as transaction processing is often delayed, and micropayments cannot be processed efficiently. However, using a DLT to manage and process euro payments can provide such a required payment solution. Euro-based smart contracts can be implemented to automate business processes, significantly increase process cycles, simplify payment processes, and enable IoT payments from machines to machines or other devices.

In this paper, we analyze the status quo of IoT payments and explain the limitations of using the SEPA system for IoT payments. Furthermore, we discuss how DLT-based euro payment solutions can be beneficial for IoT. In particular, we analyze a trigger solution — connecting the conventional SEPA system with a DLT –, stablecoins, tokenized e-money, tokenized commercial bank money, and a DLT-based central bank digital currencies (CBDC). Additionally, we outline specific use cases related to goods logistics and Asset-as-a-Service/Pay-per-Use that benefit from such payment solutions.

We find that the trigger solution will be sufficient in the short term to enable programmable payments. Nevertheless, the trigger solution does not address all current limitations of the SEPA system, as the euro remains in an account-based system. In the medium term, native, DLT-based euro solutions will therefore be needed, such as tokenized commercial bank money and e-money.


Download the full paper here as PDF-file (German version here).

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Prof. Dr. Philipp Sandner has founded the Frankfurt School Blockchain Center (FSBC). From 2018 to 2021, he was ranked among the “top 30” economists by the Frankfurter Allgemeine Zeitung (FAZ), a major newspaper in Germany. He has been a member of the FinTech Council and the Digital Finance Forum of the Federal Ministry of Finance in Germany. He is also on the Board of Directors of FiveT Fintech Fund and Blockchain Founders Group — companies active in the field of blockchain startups. The expertise of Prof. Sandner includes crypto assets such as Bitcoin and Ethereum, decentralized finance (DeFi), the digital euro, tokenization of assets, and digital identity. You can contact him via mail ( via LinkedIn or follow him on Twitter (@philippsandner).

Jonas Gross is a project manager and research assistant at the Frankfurt School Blockchain Center (FSBC). His fields of interests are primarily cryptocurrencies. Besides, in the context of his PhD, he analyzes the impact of blockchain technology on monetary policy of worldwide central banks. He mainly studies innovations as central bank digital currencies (CBDC) and other crypto currency projects as “Diem”. You can contact him via mail (, LinkedIn ( and via Xing (



Philipp Sandner

Professor | Lecturer | Author | Investor | Frankfurt School Blockchain Center