W.B. King of the Credit Union Journal recently reported that credit unions are eyeing wearables as another aspect of digital wallet adoption. According to CO-OP Financial Service CEO Todd Clark, wearable payments – whether made from a watch, a jacket, a pair of sunglasses – are all powered by digital wallets.
“Credit union executives see very clearly the need to offer members and prospective members digital experiences,” he told the publication.
“And that’s because the average consumer is having digital experiences all day long in every aspect of their lives. They are expecting their credit union to provide seamless access to the apps, devices, platforms and experiences they love and that includes wearables.”
Meanwhile, BECU’s Digital Payments Senior Manager of Product Management Nidhi Shandilya told the Credit Union Journal that getting involved in wearable devices “comes back to our payment vision to provide payment solutions to our members that are both relevant and intuitive.”
From a technology perspective, says Shandilya, “the bulk of the work” in relation to new wearable devices was done in partnership with CO-OP and the card networks during initial digital wallets rollout in 2015.
“We were using tokenization as the underlying technology, which essentially replaces a card’s PAN number (the 16-digit number on the plastic card) with a unique alternate card number or token,” Shandilya explained. “Wearables are just another implementation of a digital wallet in this sense. As an early adopter of the various digital wallets that have launched over the last couple of years, one of the things that we discovered is the amazing repeatability of this secure and seamless payment technology.”
As we’ve previously discussed on Rambus Press, IDC analysts expect the popularity of wrist-worn devices – including watches and wrist bands – to continue driving the wearables market forward. More specifically, watches, including both smartwatches (capable of running third-party applications) and basic watches (which do not run third party applications), will comprise the majority of wearable devices throughout the forecast.
“Apple and Android Wear will drive the market forward, but the market will also see new entrants running on their own proprietary operating systems (i.e., Fitbit’s own Java-based operating system and Garmin’s Connect IQ),” IDC analysts wrote in a recent press release.
“[Moreover], basic watches will see their volumes swell past smartwatch volumes by adding wearable technology to traditional watches. Altogether, the diversity of watches and experiences will appeal to a similarly diverse audience with differing tastes and preferences, leading to a larger total available market and growing volumes each year.”
Meanwhile, Gartner analysts forecast that 310.4 million wearable devices will be sold worldwide in 2017, representing an increase of 16.7% from 2016. In addition, sales of wearable devices are expected to generate revenue of $30.5 billion in 2017. Of that, $9.3 billion will be from smartwatches, which are on track to achieve the most significant revenue potential among all wearables through 2021, reaching a total of $17.4 billion.
It should be noted that a number of wearable vendors and banks have been piloting and launching a range 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 evolving 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.
Interested in learning more about the future of mobile payments? You can check out our eBook on the subject below and our article archive on the subject here.