Wearable payment all set for a boom

WEARABLE technology in watches, wristbands, jewellery, glasses and clothing is booming. Lurking behind these tools is another potential growth: Wearable payments.

While consumers may 
initially be sceptical about wearables that provide direct access to bank and credit accounts, near-field communication (NFC)-based technology has already gained widespread acceptance and take up, according to industry trade body Smart Payment Association (SPA).

“The killer feature that may well propel wearables to the next level is that it eventually may well provide users with a ‘persistent’ digital identity that melds the functions of a driving licence, credit card, house key, car key and computer into one small gadget worn on the body. Disney World’s Magic Band already allows visitors to get on rides, pay for food and enter their hotel rooms,” it said in a white paper entitled “Wearable tech: A growing payment opportunity”.

Industry projections suggest that wearable payment in 
transit systems is set to take off in the next five years, with projected wearable devices used 
to make transit payments increasing from 3.5 million 
in 2015 to 122.6 million in 
2020.

“Consumers are hungry for a variety of payment options that support different needs, and widespread acceptance for convenient ‘frictionless’ payment solutions is growing apace,” it said.

Despite a slow start for wearable technology, industry analysts estimate that 48 million wearable tech units were shipped in 2016. Fitness bands topped the bestsellers list, accounting for 85% of 
last year’s market, according to International Data Corp (IDC) data.

“Despite all the hype surrounding smart wearables — including devices like the Apple Watch — for the moment it appears that basic wearable devices reign supreme,” the white paper said.

“The appeal of wearable payment for consumers is easy to understand. The ability to use items worn on the body to quickly and easily pay for goods and services takes the convenience of mobile and contactless payment to a new level. Payment providers, meanwhile, are seizing on the world of possibilities of wearable tech.”

Based on IDC’s prediction, though, it noted that as users’ tastes evolve, the opportunity for smart wearables — multifunction devices equipped with third-party applications — is set to burgeon.

“And payment looks like being the transformational application that captures the public imagination and drives the mass take-up of wearable tech,” it said.

Half of the consumers in major markets — including North America, Japan and Western Europe — will be using a combination of 
smartphones and wearables to make payments by 2018, according to a study by Gartner Inc.

Malaysia may not have seen the advent of wearable payment, but other electronic payment methods have been gaining ground. One of them is the Touch ‘n Go payment card. Just a few days ago, Touch ‘n Go Sdn Bhd (TnG) had entered into a joint 
venture with China’s online payment platform Alipay to venture into mobile wallet solutions in Malaysia.

The new e-wallet will give current and new TnG users access to more services on their mobile phones. Currently, there are 10 million active TnG cards in Malaysia, used for electronic payment purposes at toll roads, public transport systems, parking lots and retail outlets.

The smart wearable tech front is being used in a 
variety of applications, including personal and business computing, fitness trac- king, navigation and healthcare monitoring.

“But it’s the potential of wearable payment devices like smartwatches, wrist bands, key chains and fitness trackers that is currently exciting market analysts. And, as we’ll see, wearable payment tech is evolving fast,” the report said.

And it is seen as a booming market. Global wearable device shipments are set to hit more than 500 million 
by 2021, according to ABI Research. Analysts estimate 20% of these devices will be “connected” with a payment, transport or access control application.

The most common types of wearable payment devices merchants are likely to encounter today include smartwatches and fitness trackers fitted with contactless payment technology.

These include Apple Watch (Apple Pay), Samsung Electronics Co’s Gear S2 smartwatches (Samsung Pay) and Jawbone’s fitness tracking wristband, the UP4 (which syncs with a user’s American Express card and utilises NFC to support wearable payment).

In February 2017, the rollout of Android Wear 2.0, Google’s smartwatch opera- ting system, has at last 
enabled contactless payment for Android smartwatches equipped with NFC.

In the UK, the report noted, Barclays plc’s first trialed 
its bPay technology back in 2012 and in 2015 launched three fully “open market” bPay products — a wristband, fob and sticker — which enabled users to attach any Visa or MasterCard debit or credit card to make contactless 
payments. Since then over 100,000 bPay products have been sold and used to make a million transactions totalling just over £5 million (RM27.9 million).

More recently, it said Barclays has released bPay Loop, a device which slides onto the strap of any watch or fitness tracker to add payment functionality. Users simply add funds to the digital wallet linked to the device and can then use it to pay for transactions of £30 and under at 
over 400,000 locations across the UK.

In Australia, Inamo’s new CURL solution — a multifunctional wearable which 
is rugged and waterproof, and requires no power to facilitate payment — is being taken up by users who need a solution to the challenge of carrying a wallet or payment card in scenarios when it is not convenient: Participating in sports such as running, swimming or cycling or while at the beach. CURL is also being used for payment on public transport, building access, ticketing for festivals and gym membership to 
provide users with one multipurpose device.

The path forward is not without challenges. With the emergence of new form factors, it is not unclear if the payment industry or consumer manufacturers are in the driving seat, the white paper noted.

“Form factors and functionality will need to be managed, and scheme standards and requirements established, applied and policed. At the moment, there’s little clarity around the standards that apply to devices manufactured by SPA members and those created by consumer brands that are tapping into a variety of payment ecosystems; for example, smartwatches and jewellery manufacturers are replacing physical SIM cards (subscriber identity modules) with downloaded credentials,” it said.