Will Wearables be the Next Big Thing in Payments?
With mobile payment taking the lead in cardless payment, will wearables be the next big thing in payments? What can the payment wearables tech firms do to encourage adoption?
Security is the key concern for the payment industry, be it online, card, mobile or wearables. Consumers are concerned with security issues such as identification, fraud, loss of information, etc. at all times, whether they are using or not using the wearable, or when the wearable is lost. Tech companies will need to address these concerns, for example, an account control to terminate payment function during the loss of device as what is currently done with credit cards
2. Utility vs Price
Utility and Price are general concerns for customer adoption. Wearables are not mobile phone replacement (yet) for most designs in the market currently. Most wearables in the market now are either smart watches or fitness bands.
If payment wearables are to be a watch replacement and yet complementary to a mobile phone at the same time, the possibility of increasing customer adoption could lie with utility, being what function and the usefulness of the functions the wearable has, and price, being how much consumers are willing to pay for the wearable given i) the functions the wearable has, ii) how they are using the wearable, and iii) the affordability of the consumers in a particular market. We feel that prices of such time wearable should not bear a high price tag given that it is still an electronic device and higher chance of older models getting obsolete fast.
If payment wearables are not even a watch replacement, for example, fitness bands. We feel that consumers are likely to expect the wearable to be much cheaper than a time wearable unless there are differentiation factors, such as the material used, or perhaps brand endorsement by a luxury brand.
Customer adoption rate is also dependent on how convenient it is to use the wearable to pay, meaning how widely it will be accepted for payment, especially for retail purchase. Another angle could also be whether each wearable is simply linked to one payment/bank account or linked to multiple payment/bank accounts.
Tractica forecasts that wearable payment transaction volume will grow from $3.1 billion in 2015 to $501.1 billion worldwide by 2020, by which time wearable payments (i.e. smart watches) will represent approximately 20% of the total mobile proximity transaction volume and about 1% of total cashless transactions in retail. Whether or not this will happen, remains to be seen.
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