Interaction design has its roots in digital interfaces. It is the touch point between human and computer systems. With introduction of new devices and new ways of interaction, pre-conceived ideas have changed (from mouse to finger). As definition of interaction design stabilise, it has broaden to include non-digital products such as washing machines, remote controls etc.
Service Design has roots in service industry, the design of activities that is needed to deliver a service, or improve interaction between service provider and customers.
Service Design and Interaction Design can be wildly distinctive and it is easier to understand the differences by using examples. Hair Salons has no product, it’s success is dependant on service design. Game Developers create products and not service, their success is highly dependant on Interaction Design.
As people become increasingly entrenched in digital technology. Service-oriented industries need to venture digitally to start or continue their engagement with customers. For example, Airlines or Hotels with booking and reservation websites.
Digital-born companies ultimately deals with people. To ensure a holistic experience, they have to start designing for the entire customer journey, where service design usually comes in. For example, Amazon is internet based but has to think about delivery time, customer service etc.