From fitness applications to contactless monetary transactions, the way wearables have influenced consumer behaviour has changed notably in recent years. Advances in IoT and mobile technologies will play key roles in the future of the industry.
Sudip Saha is the Managing Director and co-founder of market research and consulting firm Fact.MR. The firm tracks high-growth markets across 8+ sectors in over 100 countries. Based on a recent report by Fact.MR, Wearable Payment Devices Market, Saha gives his views on the next stage in digital payments and where the limitations lie for wearable payment devices:
Significant strides have been made in terms of wearable payment technologies in recent years, with growing interest being displayed by mainstream banking and finance organisations. A number of leading consumer brands are leveraging their assets for mass production and sales. Devices such as the Apple Watch, Everlink DebitWear, and the Barclay’s bPay wristband are some of the more popular offerings available to consumers.
The Potential for Wearables for Payments
Since late 2019, the usage of cash and paper checks have declined notably, with significant impetus provided by the introduction of NFC technologies. Consumers are already frequently making contactless payments through smartphones. The development of wearable options is likely to increase such transactions in the near future.
Retailers and transport service providers, particularly in Europe and North America have seen investments in the deployment of appropriate infrastructure to accept transactions based on QR-codes and NFC.
Wearable devices also act as a single source for multiple types of information, similar to that of a smartphone. In addition to fitness and payments, these technologies will also find growing applications in the automotive and healthcare sectors that will help ensure long-term growth in the sector.
Tokenisation Trends Generate Niche Opportunities
The global wearable payments market is set to surpass a valuation of a trillion dollars in the coming decade with major countries in the Asia Pacific driving the change. China, India, Australia, and Singapore will emerge as major contributors owing to larger consumer bases.
As people turn to contactless payment options, there is a notable requirement for developments aimed at digital-technology-rich lifestyles. Contactless payment methods are also gaining importance following the onset of the covid-19 pandemic, in compliance with social distancing measures.
The market for wearables is set to rise steadily, providing consumers with superior flexibility and control over small scale financial operations. Mastercard has partnered with MatchMove and Tappy Technologies to allow Mastercard cardholders to use a simple payment chip through Bluetooth enabled devices.
Simply following in-app instructions the card is tokenised with the aid of digital enablement services. Such tokenised payments remove the need for accessing cards or smartphones during the payment process, allowing for better security and faster payments.
The Role of Biometrics in Security Solutions
In the last few years, major developments have been made towards the application of fail-safe biometric technologies for user authentication. Devices such as NFC wristbands can even make use of parameters such as a user’s heartbeat rhythm to confirm identities. This is a major advance in security, with passwords being increasingly rendered obsolete, and difficult to memorise.
On average business users require 15 different passwords, which can cause potential security breaches. Innovations in geo-location and biometric technologies provide superior protective solutions against unauthorised data collection.
Leading Challenges of Wearable Payment Devices
While the prospects of wearable devices for financial applications are very positive, device manufacturers and financial contributors need to consider some challenges that could limit operational capabilities in the long-term.
Firstly, interactions between different software platforms and devices are limited based on the reliance of technologies such as NFC or Bluetooth. It is critical for wearable devices to be able to operate with as many platforms as possible. Also, keeping associated research and development efforts financially viable will play a key role in long term success.
Solutions involving cloud-based backend systems to overcome issues of storage and computing limitations are likely to gain the attention of manufacturers in the near future.
While leading brands are taking efforts to simplify their offerings for end users, concerns associated with data security and privacy are expected to hurt sales prospects from a consumer viewpoint. Almost 80% of all consumers have voiced concerns from IoT and wearable technologies in terms of keeping sensitive data private.
Uncertainties over data being collected without clear user consent, clashes against consumer demand for operational convenience. Investments into data security research will play a key role in future developments.
Major Players Take Large Strides
Leading players in the finance industry have already taken steps to make their presence felt in the wearable payment devices sector. For instance, in 2016, Visa used wearable tech in products such as rings, watches, and bracelets to implement its tap-to-pay scheme for participants in the 2016 Rio Olympics.
Coin, an emerging player in fintech and electronics has been acquired by Fitbit. Consequently, fitness trackers from the company in the future are also expected to provide payment functionality to users.
In 2020, Mastercard entered into agreements with technology providers such as Qualcomm and General Motors to deploy their wearable technology initiative. The surge of internet-connected devices during the year has opened up potential objects that can be converted into payment devices. Lyle & Scott, based out of the United Kingdom have even launched a jacket in collaboration with Barclays to process payments with a simple swipe of the user’s arm.
It is important for hardware manufacturers and software developers to keep an eye on changing obstacles to product development and adoption, with a focus on the factors of form and function. Aesthetics will prove important to attracting customers, while the demand for user convenience with seamless customer experiences will drive long-term developments.