Regardless of the rapid growth of mobile technology enabled mobile payments, industry professionals can’t assume it will stay the next big thing forever. Payments are evolving and so are technology and consumer habits. Although at this point mobile payments seem to be the most potent consumer facing proposition, there is the next wave close on its heels– wearables.
Smartwatches, in particular, are believed to be gaining traction and in the nearest future will be an inseparable part of daily habits. In their desire to simplify and smoothen the payments process, financial institutions and payments companies will eventually turn to smartwatches or other types of wearables instead of phones.
Not only financial institutions, but the technology companies have also 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…”
There is experimentation underway in the wearables industry with tech companies and financial institutions piloting different NFC-enabled solutions. Their successful adoption and use for payments wearables will eliminate the friction at the payments terminal, hence, possibly aiding retailers in sales.
When we speak of wearables, the first one to come to mind is Apple Watch. Apple Watch was one of the first attempts to enable frictionless payments with a wave of the wrist. Another effort to enable payments with wearables came with bPay by Barclays. Some other companies that also tapped into the market were partnerships between wearables manufacturers and payments companies, like Swatch and UnionPay, Alipay and Xiaomi.
Earlier this year at the International Consumer Electronic Show, MasterCard unveiled its debut in the wearables industry by announcing a partnership with Coin to bring MasterCard payments to a wide array of fitness bands, smart watches and other wearable devices. Coin’s technology will add a payment function to wearables, while MasterCard enables payments without the exchange of sensitive card information.
“We are talking with lots and lots of partners in this space. It’s generated a ton of interest,” Sherri Haymond, a senior vice president at MasterCard, said in an interview. The first devices using its secure payment service should come to market this year.
One of the latest experimentations with wearables was a stretchable disposable patch that can have a range of applications. MC10, the healthcare technology company specializing in stretchable body-worn computing systems, and PCH, which designs custom product solutions for startups and large companies, have partnered to commercialize MC10’s Wearable Interactive Stamp Platform (WiSP™). The partnership will allow brands to develop a variety of consumer applications for the platform, which is a skin-worn, ultra-thin, stretchable and disposable stamp. When paired with a smartphone, tablet, or NFC reader, the WiSP platform enables a variety of consumer applications, such as cashless payments, hotel room access, event registration, interactive experiences at amusement parks, sporting and music events and VIP experiences. The WiSP platform can also be used in clinical environments to transmit important patient information and streamline procedure flow.
Wearables shipments are expected to grow to more than 235 million devices by 2020, which is a fourfold increase from the 80 million units expected to be shipped in 2016. Moreover, by 2019, 30-40% of those devices will have a payments function. For comparison, today the number is 2%.
Such a massive expansion of the industry wouldn’t be possible without 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. Some estimations suggest that owners of wearables with the payments function embedded in them will spend $1.9 billion paying with their devices by 2018.
According to some other forecasts, wearable payment transaction volume will grow from $3.1 billion in 2015 to $501.1 billion worldwide by 2020. 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.