EXCLUSIVE: “Getting Closer” – Terrie Smith, DIGISEQ in ‘The Fintech Magazine’
Terrie Smith, Co-founder and Global Ambassador at wearable tech pioneer DIGISEQ, on why issuers should open their eyes to a new dawn in wearable payments
The age of contactless payments has arrived. Now accounting for more than 50 per cent of all POS transactions worldwide, contactless technology has evolved to become even more efficient, affordable and user-friendly, with wearable payment tech leading the way among a spate of new services hitting the market.
Mobile POS (mPOS) services – such as Apple’s Tap to Pay – are enabling millions of merchants, from small businesses to large retailers, to convert their iPhones or iPads into POS devices that can accept contactless payments, digital wallets, and any wearable tech item with a simple tap – without the need for specialised POS terminals or hardware. In fact, it is estimated that there will be as many as 34.5 million retailers using mPOS solutions globally by 2027.
The continuing convergence of contactless and mPOS is music to the ears of banks and issuers aiming to capture more contactless transactions through their mobile banking apps and digital wallets. In the UK alone, new data from Barclays – which sees nearly half of the nation’s debit and credit card spending – reveals that a record 91.2 per cent of all eligible card transactions were made using contactless payments in 2022, a sign that consumers and businesses are continuing to shift to next-generation technology when buying and selling.
With merchants in all industries adopting mPOS solutions, wearable technology is being pushed into more applications, use cases and areas where, until recently, only cash could be utilised.
When the first contactless payment card was introduced to the UK market in 2007, users could only make low-value purchases of £10 or less – ideal for fast food restaurants, coffee shops, and other perishables that could be purchased on-the-go. However, successive increases in the contactless limit have allowed customers to utilise contactless to pay for more expensive items from a wider variety of in-store merchants.
It’s now possible to use contactless to pay for weekly grocery runs, fill up with petrol, and make large-value purchases in other retail settings. According to data from UK Finance, the average contactless payment climbed by about 30 per cent when the £100 threshold – which replaced the previous £45 cap – was introduced in October 2021. Even when comparing 2022 against the contactless transactions made at the end of 2021, after the higher £100 limit had been introduced, transaction values were still 5.3 per cent up on 2021’s figures.
Previously, many banks and issuers were reluctant to fully explore wearable technology due to misconceptions regarding costs and complexity, with their hesitation costing them both valuable transaction growth as well as potential new clients.
This reluctance to test wearable technology can largely be attributed to prior failures. Heralded at the time as the next contactless revolution, the most well-known example of this is arguably the introduction of the bPay brand by Barclaycard in 2014. With bPay, users had to purchase the wearable, place the chip into the item themselves, download an app, register the device, and then transfer funds from a separate account in order to make a payment. Subsequently, due to this convoluted and fragmented approach, drawing in new users proved extremely difficult.
“It is now much simpler, quicker, and cost effective for banks to get wearables into their clients’ hands and provide their customers with almost unlimited options in how they make payments”
Perhaps even more significant is the fact that Barclaycard declined to enable Apple Pay, which launched around the same time. With the ability to link all debit and credit card payment methods in one wallet – on phones and smartwatches – both Apple and Google Pay quickly attracted the attention of consumers, and as a result, banks suffered defeat in the opening battle over wearable tech and mobile wallets, with bPay eventually being phased out.
GIVE THEM WANT THEY WANT
So, what’s behind the current boom in wearable payment technology? And why are wearables once again capturing the imagination of banks and other businesses?
It’s clear that consumers want more portable, fashionable, and convenient products that support contactless payments. The past 10 years have demonstrated how rapidly people grew accustomed to tying their cards to mobile wallets, smartwatches, and other active wearable devices. The convenience of these devices, however, is somewhat constrained by their battery life. By transitioning to passive objects that don’t require a battery to operate, wearable technology has been able to tackle this problem head on.
Today, a contactless chip can be embedded into a ring, bracelet, and even items of clothing. This chip can then be connected to a cardholder’s bank or prepaid account and instantaneously activated using an iPhone or Android device. We are now witnessing wearable technology becoming more aspirational and more attractive to customers as contactless technology gets smaller and smarter – as can be seen by the rapidly expanding assortment of high-end designer fashion items that also function as contactless devices.
In addition, it is now much simpler, quicker, and cost effective for banks to get wearables into their clients’ hands and provide their customers with almost unlimited options in how they make payments. Previously, any chip-enabled item that required personalisation would need to be provisioned with client data by the manufacturer before heading back to the bank and finally being delivered to the customer – a laborious, costly and time-consuming process.
Without the bank having to lift a finger, today’s wearable technology solutions can handle payment enablement from beginning to end at a considerably reduced cost. Using over-the-air remote provisioning, payment information can be sent to any wearable device directly from the customer’s Android or iOS mobile device, wherever they may be. This enables users to immediately link their payment card to their wearable device and begin using it.
Globally, there are more than 2.5 billion active Android users and 1.5 billion iPhone users, thus presenting a significant opportunity for wearable technology to become an integral part of peoples’ daily lives.Additionally, banks have access to a wealth of real-time data on client behaviour, and can even send customers exclusive offers and incentives to boost spending at merchant partners. With the knowledge that their contactless transactions are protected and tokenised in the same way as NFC mobile payments, users can also monitor their activity while receiving instant transaction alerts.
With the global wearable payment device market size projected to reach US $82billion by 2026, growing at a CAGR of 13.6 per cent during the forecast period, the Internet of Things is also rapidly expanding – integrating access control, brand consumer engagement, and payment applications across 5G and Wi-Fi, and an estimated 41 billion devices by 2027.
This increase is likely to be greatly influenced by the potential of wearable technology to foster much more immersive bank-customer connections and engagements. Wearable technology is opening doors for banks and financial institutions who are looking to reduce expenses and develop stronger relationships with their clients. Now is the time for banks to seize the once-in-a-generation opportunity afforded through wearable payment tech and, quite literally, get closer to their customers.
This article was published in The Fintech Magazine Issue 27, Page 30-31
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