Payments consultancy Consult Hyperion and IoT platform DIGISEQ have published a whitepaper outlining the use of wearable tech to securely authenticate consumers while creating smoother contactless payment journeys in a fast-growing range of locations.
Consult Hyperion’s whitepaper, ‘Authenticating Passive Wearables’, reveals opportunities brought about by the PSD2 regulation mandating Strong Customer Authentication (SCA) on all payer-initiated electronic payments in the European Union. It explains that issuers have the ability to simplify and speed up customer authentication by utilising wearable technology.
Wearable tech has an expected market value of $171.38billion by 2032 and a projected growth of more than $150billion over the next 10 years.
SCA currently requires the payer, or wearable user in this case, to use two factors out of three to authenticate themselves:
- Something they know (i.e. a passcode)
- Something they possess (i.e. a smartphone)
- Something inherent to them (i.e. biometric)
The introduction of SCA raised concerns regarding adding more friction to the user’s payment journey, rather than simplifying payments. However, Consult Hyperion explains its view that supporting SCA on wearables is no harder than supporting SCA on Apple Pay.
In the past, issuing payment-enabled wearable tech was a complex process. Now, with payment network tokenisation and device personalisation performed by the consumer using their mobile phone, passive wearables are a scalable solution banks can deploy to their consumers.
Unlike active wearable items that depend on battery life, like smartwatches, passive wearable items don’t require a battery, extending their usefulness in a wider range of locations. DIGISEQ tech enables any passive form factor (including bracelets, rings or shirt cuffs) to be inserted with a chip and instantly transformed into a secure contactless payment device.
‘Convenience of contactless payment beyond cards and phones’
Colin Tanner, co-founder and CTO of DIGISEQ, discussed the report findings: “The introduction of SCA in the European Economic Area and the UK has given rise to concerns that the need for users to authenticate themselves makes the user experience for wearables much less attractive.
“Understandably issuers may be concerned that any investment in wearables may be affected by a poor SCA experience. Hopefully, our whitepaper with Consult Hyperion will not only allay those concerns but also pinpoint new opportunities for issuers to extend the convenience of contactless payment beyond cards and phones and drive more transactions across users’ daily lives.
“Fortunately, a well-designed wearable solution that meets the requirements for SCA will provide users with the convenience of contactless payments plus the security associated with authentication. Even better, it should strengthen the business case for issuers as the potential exposure to fraud and theft of wearables is significantly lower than for mobile payments. Wearables are harder to steal, and due to the physical separation of the payment device from the management device, more difficult to exploit beyond SCA limits.
“The flexibility of our mobile personalisation technology creates countless opportunities for issuers and other businesses to provide truly interactive and immersive experiences and deeper consumer interaction. Just by tapping their wearable item against their NFC smartphone, users can receive instant offers and incentives, check their account balances, and much more. This delivers huge benefits to brands looking to interact more frequently with their clients, and also streamline costs and incentivise more daily transactions.”
