Today we’re going to look at one of the more buzzworthy trends in cashless payments: Wearable devices. Already in the early adopters stage, there are millions of people wearing devices that are payment ready, and there’s a lot of potential for businesses to leverage this. Smart technology has been integrated into watches, fitness trackers, wristbands, rings and keychains, and has become considerably mainstream.
In the past, wearables were only used in closed-loop environments like festivals or theme parks. Now that they’ve begun to be used in open environments, wearable electronic devices allow people to carry payment technology wherever they might go, ushering in a new level of convenience. Payment can be made with the flick of your wrist or finger. It’s exciting for consumers, but? worrying for retail operators, who need to get ready to accept NFC (near field communication) and contactless payment.
Gaining momentum in numbers
Wearable technology is no longer niche. Despite the high prices and security concerns, the numbers show that it is becoming mass market. It’s estimated that there will be 500 million devices by 2021 and 20% will be connected for payment purposes. It’s also predicted that by 2020 the wearable payment transaction volume will reach $500 billion worldwide.
Challenges for mass adoption
Throughout Europe, in parts of Asia like South Korea, and in countries such as Canada and Australia, consumers are accustomed to paying with contactless cards, and cash is quickly becoming the exception. Cards are no longer exclusively used for high value items and the introduction of NFC payments and wearables could push cash further down the payment spectrum. However, while wearable devices show a lot of potential, they are still in their infancy.
Some of the teething problems include a limited battery life and high prices for consumers. Another concern many users have is security. For example data captured by fitness devices is sensitive and needs strong protection. Others worry about payment safety, although that concern is unfounded. Contactless payment via wearables uses tokenization, which is actually safer than cash and credit cards.
Growth in consumer value
Despite these growing pains, upsurges in sales show us that consumers think these devices provide value. Early adopters have yet to completely realize what these wearable devices can offer in making their lives more frictionless. There is great potential in integrating payments into these devices, for example, the use in transportation.
800 cities have adopted technology that accepts prepaid cards in their transport systems. When contactless systems have been implemented, they have been met with great success, such as in London and recently Sydney. New York City’s MTA is set to introduce contactless payments mid-2019, which could nudge contactless growth in the US. Imagine how much faster the process would be if a consumer didn’t even have to take a card out of their wallet or phone out of their pocket. Imagine how many daily users could be paying with wearables. And that’s just transport.
With wearable products gaining momentum, the applications for the payment industry are immense and the potential for consumers and retail alike is significant. Wearables as a payment method needs nurturing and cannot be ignored.