3 minute read
As the relationship between consumers and their devices evolves, mobile devices aren’t simply used for communication anymore. They act as a source of entertainment, a personal assistant, a virtual trainer, and a payment platform. As a result, these devices rarely leave our side. Mobile payments make plenty of sense: consumers can leave their wallet at home and enjoy a number benefits from paying with their smartphone such as discounts and special offers. That said, consumers have been hesitant to adopt contactless payments, citing reasons such as a lack of merchant acceptance as well as security concerns.
But wearables offer a number of unique benefits that may lead them to become a mainstream payment method. Greater convenience, dynamic protection, and personalized support are just a few of these potential benefits.
Wearable Commerce Today
Thanks to products such as Apple Watch and Ringly, consumers are already able to use accessories as a payment option. But are people actually using them? Tractica estimates that worldwide wearable payments are around $3.1 billion today, which will grow to $501 billion by 2020. Meanwhile a recent report from Gartner predicts that 50% of consumers in mature markets will use smartphones or wearables for mobile payments by 2018.
Wearables are only beginning to gain market adoption for their commerce capabilities. While the current tally of $3.1 billion in sales worldwide is fairly insignificant when compared to the market overall, most pundits agree wearable commerce is poised to grow rapidly. Going forward we can expect more commerce-connected wearable devices to become available, such as smart-glasses and even a “contactless jacket”.
Benefits of Wearable Commerce
What is motivating wearable commerce innovation and adoption? “The primary [reason] in my view, is convenience and offering new vehicles for users,” says Karl Martin, CEO of the biometric wearables supplier Nymi. Consider for example the benefits of equipping fitness trackers with the ability to make payments, something that Nymi’s partnership with MasterCard hopes to do. Users can go for their jog or workout without pocketing a physical wallet and are then able to measure heart rate, track distance, and buy a bottle of water with one device.
While that level of convenience may be nice to have, is it enough to convince people to purchase a wearable device and change their purchasing behavior? Perhaps not, but wearable payments have a number of other benefits as well that may be enough to tip the scale.
Credit card fraud is a serious issue in the US and wearable payments offer an additional layer of protection from fraud. For example, wearables rely on biometric cardholder verification which means that it uses unique biological identifiers to authenticate payments. So if someone else has your wearable device, they won’t be able to make a purchase. Wearables can also rely on contextual information for added protection. For example, location data can be used to determine if a transaction falls outside of the normal area of use and prompt the user to further authenticate their purchase.
Wearable devices can also use data to improve the payment experience for users. For instance, if you work in L.A. and always use a corporate card when doing business in Berkeley, your device can combine location with past behavior and know which card you prefer to use at a given time.
Challenges and Conclusion
The jury is still out on wearable payments and whether or not they will gain market acceptance. Wearable payments have a long way to go before they can be considered any kind of noteworthy payment option, but as digital payments become more prevalent and more people see the value of paying without a card, they will also see the value of wearable payments.
The growing number of companies, such as Nymi and Gemalto, working to add payment functionality to wearable devices is an indication that experts are bullish on the market. It will be interesting to watch how future innovations and disruptions from companies such as these will influence the level of wearable payment adoption.