While many merchants are still adjusting to the idea of customers paying via smartphone, they may start doing even more double takes with the arrival of the next wave of contactless payment devices: wristbands, hats and sunglasses.
The popularity of wearable technology is expected to boom within the next couple years, and not just in the United States but in major markets ─ including North America, Japan and Western Europe ─ will be using a combination of smartphones and wearables to make payments by 2018.
Wearable payments are poised to make every bit as big a splash. Wearable payments can be defined as any item that can be attached to your body and used to pay for goods and services at retail markets.
At the moment, the most common types of wearable payment devices merchants are likely to encounter include smartwatches and fitness trackers. Some of these devices have been outfitted with technology to complete contactless payments, like the Apple Watch® with Apple Pay®,
Along with mobile wallets, these forms of wearables are early entries into a revolution focused on making everyday transactions easier. And it’s not just tech companies leading the charge on wearable technology either.
MasterCard®, in particular, has been loudly beating the wearables drum. In October 2015, the company announced a new program3 aimed at turning any type of item, from clothing to jewelry and handbags to key chains, into a secure form of payment. MasterCard says the ongoing spread of the Internet of Things (IoT) ─ whereby just about every physical object is connected to the web ─ will help further propel its vision for wearables to success.
So far, MasterCard has partnered with major car manufacturers, fashion designers and jewelry companies to bring its wearable payment ideas to life. In January, MasterCard also teamed up with the company Coin, which produces all-in-one connected credit cards, to add its miniaturized payment technology to just about any type of item, including refrigerators4. One of the first benefactors of this partnership will be wearable fitness trackers and smartwatches5, but you can bet MasterCard is just getting started.
While it may take some time for consumers to become comfortable using wearable payments in the United States, other parts of the world are already experimenting. In the United Kingdom, you can purchase the bPay jacket6, an innovation from the partnership of clothing company Lyle & Scott and Barclays, that hides a form of NFC payment up its sleeve… literally. Barclays’ bPaytechnology has also been integrated7 into the bPay wristband, keychain, and even a sticker that transforms almost any item into a form of NFC payment.
It’s usually true that any new kind of technology, especially one with direct access to your bank and credit accounts, is initially viewed with a skeptical eye by the public. Wearable payments should be no different, but there are some distinctions that should help bolster confidence. For instance, the type of NFC-based technology used to make contactless payments is considered safer than credit card transactions8 because it relies on tokenization to make purchases. So it’s not hard to see the potential appeal in devices that are not only easier to use than credit cards, but also more secure.
Even as new wearable technologies gradually make their way into the U.S. market, the vast majority of consumers using mobile payments in 2016 ─ an amount set to triple this year9 ─ will likely still be doing so via smartphones and watches. Its recommended merchants upgrade their POS equipment now to accept contactless payments and meet the expected demand. After all, it might not be too long before the biggest question surrounding a wearable payment device is whether or not it matches your outfit.