With PayPal emerging as a showcase application on Samsung’s Galaxy Gear smart watch, and Google Glass expected to officially launch in 2014, many industry watchers are now starting to ask whether wearables are the next frontier in payments innovation.
The prospect of always-on connected consumers using the Internet of Things raises interesting possibilities, but payment providers will continue to focus, as a priority, on developing mobile platforms.
The chief challenge of wearable technology is that it remains relatively untested, and even though it offers varying degrees of promise – depending on who is being asked – it will lack the scale to make payments economically viable for some time to come. More likely, these wearable devices and platforms will serve as adjuncts to broader mobile payment platforms rather than replace them outright. The development of newer hands-free and other payment mechanisms means that the payment market could develop beyond the need for wearables entirely.
With all the hype surrounding the wearables market, it is unsurprising that new forms of payment are now being announced in a variety of form factors. These include “Eaze,” which enables Bitcoin-based payments using Google Glass and “nod to pay” functionality.
Payments do provide a use case for wearables, and some of the earlier experiments with broader contactless technology demonstrated this. For instance, in 2011, US Bank and Visa launched a contactless payment bracelet aimed at joggers, which also contained emergency medical information. Without a larger user base, however, most banks will continue to see wearables as a niche market, at best.
Launching new mainstream payment products takes time – often a very long time. PayPal and Square grew quickly by meeting specific needs: enabling eBay and micromerchant transactions, respectively. However, broader developments such as mobile and contactless payments have taken a long time to reach anything close to being mainstream in most markets.