Are People Making Payments with Wearables?

The simple answer is, “Yes.” But when talking about any form of mobile payment, is it ever that simple? Not yet. Most consumers are still looking for a good enough reason to ditch their wallets for their smart phone. Companies like Starbucks, with their proprietary app that combines ordering, payments, and loyalty into one super-easy transaction, are the exception to the rule that, all-in-all, consumers just haven’t “bought in” to mobile payments. At least not with the level of enthusiasm initially expected when mobile payments entered the scene.

It stands to reason that by-and-large consumers aren’t running to the register to pay with their smart bands, either. The technology is still young and the marketplace continues to grow—so there’s a great chance that at some point, wearable (mobile) payments will become more commonplace. Let’s explore where the market stands today and what we have to look forward to as it matures, one connected device at a time.

Gauging Consumer Sentiments

It seems that most people are comfortable getting through their days with more than one digital device—they might tote a phone, a watch, and a fitness monitor. Whether they pull out their physical wallet to buy a sandwich, it isn’t important for most people to streamline their payment methods, clocks, and activity trackers into one device.

Industry analyst suggest that until wearables—or mobile devices, for that matter—reduce friction in the purchase process or automatically add loyalty value (a la Starbucks’ app), consumers will be more willing to make payments with cash or cards. Plus, at this point, most wearables are expensive and people are not likely to buy one because it has payments functionality.

Nevertheless, according to International Data Corporation (IDC), the overall wearables market grew 3.1% year over year in the third quarter of 2016—and fitness bands accounted for 85% of the market and experienced double-digit growth. They attribute the growth to a number of factors, including new product releases that drive sales, a fashion-first consumer mentality, and the fact that the devices are simple and dedicated to fitness tracking, “allowing the technology to blend in with the background.”

Smartwatch performance hasn’t been as impressive as fitness bands’. Apple has taken the biggest bite of the smartwatch market, and continues to enhance their products with features that meet consumer demand, like better GPS capability and waterproofing. Interestingly, these features are important for active people who may otherwise opt for a traditional fitness band. Learn more in PYMNTS.com.

What’s more, Fitbit is planning to open an app store and launch a smartwatch. The company was purchased by Coin in 2016, so there are expectations that they’ll soon be rolling out payments capabilities. Read more on Valuewalk.com

Making a Splash in Travel Industry

Wearable payments might simply be looking for its niche, which at the moment appears to be in the travel sector. Inspired by the Disney MagicBand—an (almost) all-access pass for travelers staying on Disney’s property—cruise lines are getting on the wearables trend. They’re convenient for passengers who want to make purchases or enter their staterooms without pulling out their wallets.

Royal Caribbean Cruises’s WOWband makes it easy for guests to get in and out of their rooms and the gym, buy a drink at the bar, and play the slot machines at the casino. Carnival, likewise, has created a proprietary Bluetooth- and NFC-enabled medallion for each guest to carry in their pocket or wear as a jewelry piece. It’s sent to guests after they book their cruise so they can program their preferences before boarding—so they’re ready-to-explore, access, and pay.

What’s Next?

MobilePaymentsToday.com explains that people are not making payments with wearables because of the limitations of their devices’ underlying systems and a lack of standards for contactless payments. To illustrate the point, “Consumers won’t want to wear one wristband for Starbucks, another for the grocery store and a payments-enabled ring in case they need to stop for gas.” In other words, Starbucks’ proprietary app is successful because, aside from its value, it’s easy enough for customers to access from their mobile phones. This type of flexibility just isn’t available for wearables.

But it might be coming soon. STMicroelectronics (ST) recently teamed with mobile payment companies Giesecke & Devrient (G&D) and FitPay to create a ready-to-use solution enabling mobile payments on wearables.  According to the press release, the joint solution gives users the flexibility to load multiple payment cards from various banks and from different payment networks onto the wearable, making contactless payments easy, independent of the end-device’s operating system.

This will make app development faster and easier, but will it push us closer to the day when wearable payments become ubiquitous?

IDC Wearables’ team suggests that for consumers and business users to use their watches or fitness bands to pay, their devices will need more than multi-functionality and third-party applications. They’ll also need to see improvements in the user interface, user experience, standalone connectivity, and applications that help them boost personal and professional productivity.

Explore the potential in The Next Big Thing? Wearable Payments and The Endless Possibilities of B2B Wearable Tech.