July 29, 2016
Wearable technology increasingly gains popularity as financial institutions and technology companies have expressed optimism in payments via wearables. Samsung, for example, believes that if there’s anything more nascent than mobile payments, it’s mobile payment via wearables. Currently, this is considered an early niche market, with gradual growth projected…
Indeed, by 2018, over 250 million smart wearable devices are expected to be in use – 14 times more than in 2013. The shipments of smart wearable devices are expected to grow rapidly – from 9.7 million in 2013 to 135 million in 2018.
Such a massive expansion of the industry wouldn’t be possible without a sizable adoption of contactless payments. Contactless payments are expected to grow from $35 billion in 2015 to $95 billion in 2018.
Given that contactless payments are here to stay and grow, wearables are the perfect and logical outlet to embed them. In fact, wearable payments are expected to overtake plastic cards in 5–7 years time. Some forecasts suggest that wearable payment transaction volume will grow from $3.1 billion in 2015 to $501.1 billion worldwide by 2020. And by that time, wearable payments will represent approximately 20% of the total mobile proximity transaction volume and about 1% of total cashless transactions in retail.
The US consumer market is believed to be one of the most promising in terms of wearable technology adoption. The most recent forecast from Forrester suggests that by 2021, 29% of Americans will be sporting wearable devices.
Sales of wearable devices are expected to grow from $4.2 billion in 2015 to $9.8 billion in 2021. Smartwatches are expected to comprise more than a third of wearable devices sold by 2021, with sales hitting $21 million.
As time and development tend to decrease the price of technology, wearable devices will become increasingly affordable. Topped up with social trends like the attention to fitness powered by health state and activity trackers, wearables are well poised to widespread adoption.
However, there is certainly room for improvement and a particular strategy for wearables. As Samuel Murrant, a Senior Analyst who covers consumer payments at Verdict Financial, suggested, In general, the payments industry should focus on partnering with companies selling compelling, multifunctional wearable devices and incorporating payments functionality into them.
To be of a substantial use, wearable devices need to accumulate functionality and be able to connect to the IoT ecosystem to provide meaning to each user value and desired insights. At the end, a wearable device should be altered in such a way that it becomes a useful personal ‘assistant’ (just like chatbots), rather than a source of data for corporations.
For companies, wearable devices can provide a way to better understand customer behavior and a way for improved engagement and communication aside from being a source of real-time data stream.
As Milos Dunjic, the President of Lungo Consulting, said, I can only hope that the major payments industry players will take notice and embrace this type of innovation since wearable devices are clearly an exciting part of the future of payments; simplification of their manufacturing and provisioning – without sacrificing security – can enable a very bright future.