First, there was cash, then there were checks, and then credit cards. The way we pay for things has become more and more convenient as technology has evolved. The stage in how we pay for things is now in what we wear. Wearable technology is the next phase in payment technology and is currently on a course toward revolutionizing the industry. By some estimates, up to half of all consumers in major markets like North America, Japan, and Europe will use a combination of smartphones and wearables to make payments in 2018.
What is wearable technology?
Generally speaking, wearables are defined as anything that can be attached to the body and used to make any kind of payment. The most common types of wearables are smartwatches and fitness trackers. They use services like Apple Pay and Samsung Pay to connect a device with a consumer's bank account.
As manufacturers and technology companies make changes to their systems, that means that banks and retailers need to keep up with that technology. Many retailers still have outdated systems that do not even accept mobile and contactless payments. In order to accept wearable technology payments, they will have to update their POS systems.
Some companies are not waiting for this solution. Some companies, like Starbucks, have created their own apps that can provide mobile payments without the need of updated POS systems. But the problem becomes that consumers will not want to wear separate devices for every retailer they visit. Using company specific systems means that consumers would need a watch for every store they visit. That is unreasonable. It still comes back to the POS technology and the need to improve it.
The other problem is that for some people, there is no real advantage to using wearable technology. Many people carry around a wallet wherever they go. So why would they go through the trouble of linking a mobile device or wearable with their bank information when all they have to do is take out a card? It will take some time to see how much this style of payment replaces credit cards. The job of many companies who specialize in wearable technology is to make consumers feel that they need to do this. They need to help solve a problem so that wearable technology is the only answer.
Current uses of wearable technology
While many companies still struggle to answer the why, some have been successful in creating a working wearable technology payment system.
A contactless payment jacket
British menswear designer, Lyle & Scott, works with Barclaycard to create a contactless payment jacket. There is a chip in the cuff of the jacket that lets consumers pay for goods without having to take out anything.
The Disney Magicband
Disney created the Disney Magicband to let visitors to the park pay for goods, store ticket information, get on rides faster, and unlock the door to their room. This program has been successful because it answers the why question. Guests use this system because they are less likely to lose cards and other payment types if they are not carrying them around in bags, wallets, or pockets.
Wearable technology for athletes
During the Rio Olympics, athletes sponsored by Visa were given payment rings, payment bands, and smartwatches to help them make payments, without having to worry as much about theft.
- Jawbone UP4 - This fitness tracker also serves as a payment device due to its ability to link to American Express accounts.
- Apple Watch - Unless you have been living under a rock, you have probably heard of Apple Watch. It uses the Apple Pay service to make contactless payments through the watch.
- Samsung Pay - Similar to the Apple Pay system, Samsung has created a version that can make payments from Android devices.
- Sony Wena - The Wena is not your standard smartwatch. It has all the makings of a regular watch, but just with some extra tech features. It currently makes mobile payments using the FeliCa system in Japan and Barclaycard in the UK.
- Alibaba Pay Watch - The company Alibaba, which you may know from its ever-growing website, has created a watch that makes payments in China through a collaboration with FiiSmart.
- bPay - Barclaycard or bPay has made its mark on the wearable technology market with the introduction of the system into jackets, banks, fobs, and stickers. Their services are accepted in thousands of locations across the UK.
- Ringly - Mastercard has partnered with tech company, Ringly, to allow customers to use rings as a method of payment.
The future of wearable technology payments
It is possible that many people have never heard of or used any of these payment methods. Companies are still hoping that that will change and the use of these devices will increase. In fact, in a recent poll two-thirds of people stated they would rather use a wearable than a phone to make payments. About half stated that they would use wearables more often if they could use them in stores.
It is not surprising then that Tractica estimates that wearable payments will amount to about $500 billion by 2020, from $3 billion in 2015. The majority of that growth will most likely come from smartwatches as they are the biggest driver in the growth of wearable payments, but there is still a lot of room to grow.
As companies continue to answer the why question and as stores continue to improve their POS systems, the outlook for wearable technology payments looks promising. There is no doubt that companies will continue to create new devices, improve old devices, and try to make the credit cards obsolete.