Kirsty Tull, director of marketing and communications, BillPro.com, has written an article for MobilePaymentsToday about the positive role wearables could potentially play in the mobile payments sector.
“Wearable payment devices and mobile payments are tightly linked. Mobile payments have paved the way for the versatility of wearables,” she explained.
“[However], for wearables to be the go-to payment method, they must offer something more. There must be a compelling reason to use your wearable instead of taking out your credit or debit card, [such as] a payment system that reduces friction in the purchase process, or added value like automatically using a loyalty card along with your payment.”
As Tull notes, Disney MagicBand is a “perfect example” of a wearable with a compelling reason to exist.
“These wristbands go beyond payments – they are your ticket into the parks, your pass to get on rides faster, even your room key if you’re staying on the Disney property,” she continued. “In addition, you can use the wristbands to make purchases, eliminating the need to carry a bag while you’re just out having fun. You want to use it, because it makes your life easier, and your vacation more relaxing.”
According to Tull, security is also a compelling reason to adopt wearable technology for mobile payments.
“The Rio Olympics had many concerned about athletes falling victim to various crimes, including theft,” she added. “To prevent this, Visa developed a contactless payment ring that it gave to the athletes it was sponsoring and also linked pre-paid cards to payment bands and smartwatches at the Games.”
As we’ve previously discussed on Rambus Press, wearable vendors and banks have been piloting and launching a number of solutions that employ multiple types of near field communication (NFC)- enabled form factors, including fobs, rings and stickers in addition to smartwatches and wristbands. Although wearable payments are considered an early niche market, gradual growth is projected as the industry works through multiple issues, including upgrading point-of-sale (POS) terminal infrastructure, consumer comfort with wearables and refining the frictionless payment process.
Indeed, a Stratos poll of U.S. smartphone owners found that more than two-thirds of respondents would prefer to use a wearable device rather than a mobile phone to make in-store payments. Stratos also confirmed that mobile payments could increase the frequency of wearables usage, with half of respondents stating they would use a wearable device more if it could make in-store payments. Overall, four in 10 respondents said they would make in-store payments via wearables.
As Jason Davies of the Huffington Post notes, any wearable can be payment-enabled and scaled to millions of consumers in multiple form factors, including smart jewelry and fashion. As an example, designer Adam Selman has created a prototype of two dresses, gloves, sunglasses and a handbag embedded with NFC microchips.
Meanwhile, Gartner is forecasting growth for wearables, largely due to Apple popularizing wearables as a lifestyle trend. Perhaps not surprisingly, smartwatches offer the greatest revenue potential amongst all wearables through 2019. Gartner also expects smartwatches to pose stronger appeal with consumers in the future as ownership of more multifunctional devices capable of tracking exercise increases. In addition, wristbands will offer emerging value propositions beyond fitness, including mobile payments, access, safety, wellness and health.
Analysts at IDC expressed similar sentiments, with Jitesh Ubrani terming fitness “low-hanging fruit” for wearables. Nevertheless, IDC sees the market evolving as consumers adopt new functionality such as communication and mobile payments. To be sure, Tractica estimates worldwide wearable payments at approximately $3.1 billion today, which will grow to $501 billion by 2020.
Meanwhile, Samuel Murrant, a senior analyst who covers consumer payments at Verdict Financial, recommends that the payments industry “focus on partnering with companies selling compelling, multifunctional wearable devices and incorporating payments functionality into them.” Similarly, Milos Dunjic, the president of Lungo Consulting, says he hopes major payments industry players will take notice and embrace the concept of wearable payments which can enable a “very bright future.”
Interested in learning more about the future mobile payments? You can check out our eBook on the subject here.