Can digital payments drive adoption of wearable technology?
Could payment functionality give an additional boost in adoption rates of wearable technology?
Wearables technologies are gaining traction. The global market is set to grow by 17% this year as new fitness trackers, smart watches and other wearable devices are launched. Some of these devices have already made use of NFC technology to widen their range of functionality – these are set to contribute to the $100 billion forecasted global value of mobile and wearable contactless payments, next year.
As NFC technology and contactless payments become more common, the argument to include payment capabilities into these devices grows stronger. Ultimately, wearable technologies can offer customers a more convenient way to pay.
Are smart watches the way forward?
One of the most successful uses of wearable technology to date has been fitness monitoring. Being able to track steps, distance, heart rate, calories and other health-related metrics has taken consumers by storm. While this lower-priced product is effective at attracting customers who do not yet see enough value in spending £200-£300 for a smart watch, there is a limit to how many single purpose wristbands consumers will invest in. When the use of wearable devices becomes more commonplace, there could be a bigger incentive to invest in a multi-functional device.
Perhaps, this is why we have seen one of the most well-known fitness bands, Fitbit, launch its own smart watch. In addition to health and fitness tracking, Ionic has contactless payment capabilities for any Visa, Mastercard, American Express and Starbucks Loyalty card transactions.
As smart watches from big players, such as Apple, are exploring new functionality and improving accuracy of existing tracking capabilities, it seems like Fitbit launched Ionic to stay competitive.
After a slower than expected start for smart watches, Mapa has seen providers enter into this space as the value in multi-purpose devices becomes apparent. Smart watches are now expected to be on track to account for the highest unit sales of all wearable device categories (excluding Bluetooth headsets) by 2021.
Other wearable tech
The Kickstarter-funded contactless ring, Kerv, is one of the latest wearable technologies to hit the UK market. It offers contactless payments at any of the 6 million retail locations worldwide that accept Mastercard. At £99, it sells at a price cheaper than most fitness bands however, it’s still a notable amount for a product built with one purpose in mind.
A bank that got involved in wearables early was Barclays. It introduced its own contactless payments system, bPay, in 2015. The proposition consists of a digital wallet that can be linked to different bPay devices. In November that same year, the bank announced a partnership with Topshop for a collection of wristbands, stickers, keychains and phone cases.
Reiterating the earlier point on multi-functional devices, one could question how long customers will continue to purchase wearable devices whose sole purpose is payments. But, suppose payment functionality was added to items that customers would consider buying regardless of the wearable technology, or even retrofitted to their existing items.
With this in mind, Barclays has teamed up with Timex to incorporate its bPay contactless chips into the straps of Timex’s Fairfield Chronograph watch. By evolving an existing product, the partnership can tap into Timex’s existing customer base with an enhanced product. The Fairfield Contactless, as it’s called, will go on sale in November.
Another innovative product, which could make retrofitting existing objects and clothing possible, is PayCapsule-Flex – it’s waterproof, contactless and is even said to be able to authenticate the user. Allowing customers to transform any currently owned item into a payment device could offer yet another payment option. Note however, that this is not a B2C product.
Barlcays’ bPay range is also looking at this space as it includes a device which is attachable on any wristband.
While, providers in this space will have to face challenges in terms of data storage, security and authentication, we can expect more wearable technologies to pop up on the market over the coming years.
If we are to trust the predictions, the future of digital payments and wearables are closely interlinked. While, the use of payments will be dependent on payment infrastructures in individual markets, in the right conditions, contactless functionality has the potential of driving adoption.
Mapa Research regularly monitors the Digital Payments market. For more information on our research services in Digital Payments, please contact us or meet up with us at Money2020 Las Vegas – don’t forget to use our discount code to save some money on your ticket.