Here's what's holding back wearable payments
This week, two firms announced the launch of new payment-enabled wearable devices.
- Movado announced the launch of a line of smartwatches that will be powered by Android Wear 2.0, Google's smart watch platform. The watches will offer "thousands" of apps, including Android Pay, which means they'll likely enable contactless payment functionality. The watches, which will be available in the Caribbean, Canada, US, and UK, will be priced starting at $495, and launch in five men's styles.
- A new contactless payment ring, called Kerv, launched in the UK. The product, which allows users to transact via NFC technology, will be connected to a Mastercard prepaid account, which can be managed via SMS or email, and does not need to be charged or paired with a smartphone. The ring will cost £99.99 ($122), and can be used to pay at "millions" of locations across the UK.
As wearable tech becomes more mainstream, it's clear that payments companies are trying to stake a claim in that market.
- More wearable products are gaining payments functionality. BI Intelligence forecasts that payment functionality will be included in 62% of wearable device shipments by 2020. That could be a catalyst for adoption, particularly in markets where users are already accustomed to paying contactlessly, because it's putting features in the users' hands. And to now, customers seem to be testing the service out - UK card issuer Barclaycard's wearables line saw £6.6 million ($8 million) in transactions between July and February, and Tractica expects wearable volume to grow to up to $501 billion by 2020.
- But firms need to consider that not all wearable payment products are created equally. Customers are interested in wearable payments. But it's unlikely that they will buy a new product, like a ring, for the express purpose of using it for transactions, especially if that product is very expensive. Instead, survey data from Barclaycard shows that UK consumers are most interested in retrofitting existing jewelry and wearables for contactless products. As such, multifunction products, like smartwatches, could succeed in the payments realm - as has the Apple Watch, for example. But companies might have more success focusing on multipurpose offerings or integrating payments into products users already own or might buy rather than selling a dedicated payment device.
We forecast that there will be 24 billion connected devices installed globally by 2020, up from nearly 7 billion today. And over 5 billion will be consumer connected devices by 2020, representing a massive expansion of touchpoints that could eventually offer payments functionality.
BI Intelligence, Business Insider's premium research service, has compiled a detailed report that dives into the budding industry of connected device payments, providing a rundown of the stakeholders driving innovation in wearables, connected cars, and connected home devices. It also gauges the impact of new payment devices on different payments companies, along with how these devices could shift consumer purchasing behavior.
Here are some of the key takeaways from the report:
- The Internet of Things is ushering in a new era for payments companies and manufacturers. The rapid expansion of the Internet of Things (IoT) offers an opportunity to facilitate payments beyond mobile phones, cards, and point-of-sale terminals, on a broad and diverse ecosystem of internet-connected devices.
- More transactions could eventually pass through connected devices than smartphones. We estimate there will be 24 billion of these devices by 2020, with 5 billion of them being consumer-facing. This represents a massive expansion of touchpoints where payments could be enabled.
- Card networks have developed a basic framework to enable commerce in everyday devices. Visa and MasterCard are creating the underlying infrastructure to support the standardization of payments integration and stake themselves out as the key connected payments gatekeepers. Their payment platforms are universal, allowing digital payments to grow without being tied to the success of a particular manufacturer.
- Consumer-facing IoT companies have much to gain from enabling payments in their devices, including improving the value of the device, being able to cross-sell products through the device, and laying the groundwork for future opportunities to earn incremental revenue. For payments companies, connected payments offer a new revenue stream and an opportunity to gain market share ahead of competitors.
- Wearables, connected cars, and smart home devices will be the top connected payments product categories.
In full, the report:
- Frames the opportunity for embedding commerce capabilities in new devices.
- Explains how a device becomes commerce-enabled.
- Discusses the potential for payment-enabled wearables, connected cars, and smart home devices.
- Examines the impact of connected payments on key stakeholders.
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