Over the last year, significant developments have made wearable technology payments less of an area of special interest and more of a mainstream possibility. A recent report by Deloitte went so far as to state that 2015 looks set to be the tipping point for wearables. Recently more trusted consumer brands have been launching products onto the market with increasing speed and sophistication. These companies are now successfully leveraging their ability to drive mass education and uptake. The introduction of devices such as the Barclays bPay wristband, Apple Watch, the Disney Magic Band and Everlink’s DebitWear™ are all encouraging and stabilising the expanding wearable payments market.
Challenges of Wearable Technology Payments
Privacy & Security
However, while brands are doing much to make the idea of wearable technology payments ubiquitous and simple, there are still significant challenges in the sector. Privacy and security remain especially problematic from a consumer standpoint. Reviewers of Barclays’ bPay wristband identified security and privacy as a primary concern when they were demonstrated the device during its trial.
The 2014 State of the Internet of Things study also found that 80% of consumers cited privacy concerns when it comes to wearable and IoT technologies. This was in part due to being either uncertain of or uncomfortable with what data was being collected without explicit user consent. Thus it seems that the current level of data collection required for making wearable payments work in an integrated payment sphere remains an uptake obstacle for users. It is also evident that the convenience of always-on functioning presents both part of the attraction and part of the problem.
From a strictly technological point of view, there are also important issues around device and software interaction. This includes whether a particular device relies on Bluetooth or NFC, or whether a certain service only works with specific applications like Android (such as Everlink’s DebitWear™). The need for wearable technology payments to integrate with as many platforms as possible is self-evident but this does make the development of seamless solutions expensive. The cost of embedding wearables into an ecosystem is clearly demonstrated by Disney’s sizeable investment in Magic Band.
The good news for consumers is that capital-intensive brands, holding market trust, are starting to direct attention to these issues. CitiGroup in particular is focusing on developing code for a Lego block system of integrated platforms and applications that will universalize their participation in the wearables market. Along with wearables trials with several large Canadian banks, this is a positive sign that banks and financial institutions are beginning to assess the wearable payment opportunity. These institutions are also beginning to invest in the secure and robust cloud enabled backend systems that these devices will require – particularly since wearables still have limited computing and storage capability.
Benefits of Wearable Payments
Biometrics & Geo-Location as Security
On the positive side respected global brands are responding to these difficulties with options that present clear benefits to consumers, some of which address these challenges directly; particularly where the critical issues of privacy and security are concerned.
Over the last few years there has been rapid innovation around using fail-safe biometrics as a means of authentication and in Canada, large banks such as Halifax and RBC have been taking advantage of Nymi to test NFC wristbands that use a customer’s unique heart rhythm to establish identity. Unlike fingerprints, which can be lifted or reproduced, heart rhythms have been established as fairly unique patterns and currently there was no successful attempt to copy them. Passwords have long been de-bunked as a reliable defence and statistics show that while the average corporate user is expected to maintain 15 passwords, 60% cannot memorise all of them. This is precisely the kind of security breach wearables can tackle and trials demonstrate that biometric data and geo-location offer strong protection against improper data collection.
Design and Always On Devices
The always-on aspect of wearable technology payments presents another tangible benefit to consumers. Integrating smart and elegant design (as with the Apple Smartwatch), the convenience of tapping or touching a wristband, ring or watch offers a leap forward in the development of seamless lifestyle integration that consumers have been expecting. What users are now looking for is that if everything is connected, they should be able to walk out with their purchases without thinking about payment. They should trust that they can delegate that task to a smart network and wearable payment solutions are a fit for the new payment experience.
It’s clear that confidence in the future of wearable payment solutions is growing. As of 2015 CitiGroup created a position for a dedicated strategist to organise the bank’s approach to mobile devices, wearable devices, and the Internet of things (6). However, it is important for producers of both hardware and software to overcome the remaining obstacles to development and uptake. Given the nature of those challenges, the answer seemingly lies in two long-standing pillars of technological progress: form and function. In other words, wearables will entice users if they are beautiful and if they are able to provide a significant delta of improvement whereby the user’s life is made explicitly easier and more enjoyable by their implementation. The experience of using a wearable payment solution must be seamless and it must be genuinely quicker and easier than pulling out a wallet and safer than using a card.