December 4, 2019
Studying the properties and composition that make up the FinTech ecosystem
Welcome to this week’s industry analysis with the FinTech Chemist. There isn’t a busier day at the gym than Thanksgiving Day. Everyone is preparing to indulge and consume two to three times their regular caloric intake. As I begrudgingly climbed onto the stair stepper, I noticed something interesting: almost everyone at the gym had wearable technology on, whether it be an Apple Watch or Fitbit (myself included). Wearable technology has gone far beyond just telling time and letting you know how many calories you’ve burned. We now live in an omnichannel retail world, so where does wearable tech fit in?
Excitingly, wearable tech has gained traction in the payments space, as more and more users adopt contactless payments. The US was slower to accept wearable tech than other regions, but according to a PaymentsSource article, consumer attitudes, banks’ willingness to support wearables, and retailer accessibility have all improved in the last few years. As the wearables market expands, mobile payments technology has increased accessibility and improved user experience. PaymentsSource reports that the wearables market is primed for even more growth, doubling annual unit sales over the next five years to reach 260 million in 2023.
I use my Apple Watch every day, and one of the features I love is the mobile wallet. With my debit and credit cards stored in the Wallet app on my iPhone and added to Apple Watch, I often make contactless payments. (At least in places where Apple Pay is accepted – again, adoption has been slow here in the US). Even if I forget my phone, I can still make a purchase with my Apple Watch.
We still have a long way to go, especially since near-field communication (NFC) terminals are required for contactless payments to function correctly. A significant challenge to the initial growth and adoption of wearable payments was the lack of availability of point-of-sale terminals that could process NFC transactions. According to Berg Insight’s NFC Report, the number of globally installed NFC-enabled terminals hit 54.5 million in 2017 and will reach 112.3 million units by 2022 – accounting for over 78% of the world’s point-of-sale terminals. Unfortunately, the adoption has been so slow because NFC payments via wearable devices provide the same low risk to merchants as chip-and-PIN contactless payments but with the added bonus of increased speed and convenience at checkout.
Interestingly, the smartwatch market is expected to more than double over the next five years as use cases expand for fitness, health care, payments, and controlling other devices, according to Research and Markets. If the wearable tech market is going at all in the direction of mobile payments, we can certainly expect more widespread consumer adoption. Now, onto my next scientific… I mean FinTech hypothesis adventure. And, as always, remember to take your vitamins!
Read the previous edition of The FinTech Chemist.