Wearable payments devices are only just beginning to emerge but they are already shaping up the market as innovation is ramping up amongst many players internationally. The adoption of contactless and consumers preference will be key in defining the future of wearables. Valentina Romeo examines the latest developments to see if the technology will remain in its niche
Like other forms of new technology adapted to financial services, wearable digital tools still represent a big island to explore.
Though still far from reaching the mainstream status, wearables are shifting the market dynamics, as different countries come to the fore with their payments innovation.
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Already considered a pioneer in the contactless payment space, UK Barclaycard has re-joined the tech revolution with its wristband, bPay. A contactless wristband device, the tool marks the first time in the UK that non-card payments can be made with a wearable product in any outlet.
"With bPay band we are responding to customer demand to extend the range of payment options – consumers tell us they want more convenient ways to pay, whilst retailers want to be able to meet that demand. We’ve seen huge enthusiasm the concept in the trials we’ve being running over the past few years and we believe that there’s real appetite out there for contactless and wearables which offer a win-win-win for all parties," Barclaycard tells EPI.
They explain further: "Whereas previously customers could only use the bPay band at closed events such as Pride or BBT, the new iteration is open-loop and customers will now be able to use it at any contactless merchant. This will hugely increase its potential."
Not surprisingly, Barclaycard is also looking at other ‘forms factors’: "Wristbands are the first form we’ve tried. We are seeing huge interest from the fashion industry, where there’s potential for putting wearable technology into clothing, jewellery, handbags and other accessories."
Looking at other countries, it is worth mentioning Spanish CaixaBank and its recently launched Visa wristband. The device allows users to make easy payments at merchants using the contactless system at more than 300,000 businesses across Spain. This summer the bank plans to distribute 15,000 contactless wristbands to those customers who have made the most use of their contactless cards.
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By GlobalDataCaixaBank currently has more than 4m contactless cards in circulation, 200,000 contactless-ready PoS systems and accounts for 16% of all contactless payments made in Europe, according to Visa estimates.
Early in 2014, CaixaBank also launched two mobile applications based on wearable technology.
Sony SmartWatch 2, an application for smartwatch devices and another app to help Google Glass users locate branches and convert currencies.
The bank says: "Wearable devices were launched very recently, so exciting innovations in devices and technologies are still to come. We need to follow the latest trends very closely to pick the opportunities that are bound to arise. For instance, this means that time available to plan new roll outs will be shorter than usual." "The key to making this a reality is ‘make it easy’."
Work in progress
According to analysts at IDC, the market for wearables is set to boom, growing by 78% a year until 2018. This means that the number of smartwatches and related should top 19m by the end of 2014, before reaching 112m in 2018.
A number of companies have already launched wristband devices – from the fitness-related devices released by Nike, to Samsung’s Galaxy smartwatch.
As the end of June, Samsung will be also launching its first Android Wear device. It has not entered the payment game yet, but it might get there soon. At the moment, the pressure is on for Google to lead the wearables market before rival Apple launches its smartwatch later this year, the highly anticipated iWatch.
However, "the issue with Apple is that the company has not had payments as a major feature of its device, and it may feel that the technology it has purchased would be put to better use in support of other types of applications," says Ben Jackson, senior analyst, Mercator Advisory Group Prepaid Advisory Service.
According to Jackson, Walt Disney Parks and Resorts’ MagicBand is perhaps the most ambitious wearable project. MagicBand is a contactless wristband Disney created for its park and hotel patrons to use as a room key, theme park ticket and payment account.
Jackson tells EPI: "The growth of wearables will begin with companies like Disney because the use case is intuitive. Wearables will most likely follow the path of mobile payments. Starbucks Coffee Co. was one of the first companies to successfully grow a mobile payments application because the use case was so clear and the customers were regular visitors and frequent buyers."
Keeping payments fit
Wearables for fitness enthusiasts could also help raise the technology’s profile and represent a valuable opportunity for the payment industry.
For example, Fitbit, Jawbone and Nike Fuelband are devices that track a user’s physical activity level. While these devices lack a payments element at the moment, there is a good chance it would be added in the future.
According to IDC, these complex accessories will lead the wearables market through 2018 as users continue to embrace their simplicity and low price points.
Jackson also mentions VITAband, a sport band device once embedding a contactless payment feature. However, VITAband was inevitably removed from the market by its issuer, Bancorp Bank, as ‘the product was ahead of its time as contactless payments were not widespread’.
"I think fitness bands are a place where wearable payments could begin to expand into the mainstream. The hurdle is that there would need to be sufficient marketing to both retailers and the sports community about how the bands work and where they can be used," Jackson says.
Ready for the switch?
As context is key for wearable payments adoption, what remains to be determined is whether or not they just fill niches like theme parks, or can become a widespread form factor.
Jackson says: "Wearable payments could become a favourite, but I think they need to solve a problem that exists today. In other words, people are used to paying with their cards and cash and wearables have not yet demonstrated that they make life that much simpler for the shopper."
He concludes: "People have preferred ways to pay – cards that give them rewards, cash for managing budgets, etc. – and unless those can be integrated into wearables, they will need to be convinced that there is a good reason to make the switch."
