A 'Fitting' Solution to Payments-Free Smartwatches

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The smartwatch revolution didn't begin with Apple, and the early adopters of wearables may not want to upgrade just to add payments. Fit Pay Inc. has a plan to meet this audience halfway.

The San Francisco-based company this week launched a Kickstarter campaign for its Pagaré "smart strap," a replacement watch band for owners of the Pebble, a popular smartwatch brand (and Kickstarter success story) that predates Apple and Google's smartwatch ventures. The strap adds a Near Field Communication-based contactless payment capability.

By midnight on the first day of a 29-day crowdfunding campaign, more than 1,000 people had pledged to buy a Pagaré strap with the Kickstarter discount, bringing the company more than halfway to its goal of $120,000 needed to deliver the product by July.

Pagaré, available for $89 as an accessory to the Pebble Time smartwatch, or $289 for a smartwatch and Pagaré bundle, isn’t the first or the fanciest payments innovation for smartwatches, concedes Michael Orlando, Fit Pay’s co-founder and CEO. The device will work very much like Apple Pay within the Apple Watch, relying on NFC and a secure element leveraging card network tokenization technology.

But unlike Apple Pay, it doesn't require users to buy into the full Apple ecosystem, nor does it require a compatible Android or Samsung device as Android Pay and Samsung Pay do. What’s different about Pagaré is the concept’s versatility.

“I don’t think Apple Pay has solved mobile payments through the smartphone or its own watch,” Orlando said. “What makes sense to me is embedding frictionless payments within any wearable device.”

Fit Pay’s core business model is providing the payment capabilities of its Trusted Payment Manager platform as an integrated solution to wearable manufacturers,  Orlando said. The Pagaré band isn't a one-size-fits-all watch band, since it hides the secure element in a backplate shaped to fit a Pebble watch, but there is interest in expanding the concept to other products.

“We’ve already signed with other device manufacturers for products coming out later this year,” he said, declining to provide details.

Geisecke & Devrient on Feb. 4 announced a $3.1 million investment in Fit Pay, when Scott Marquardt applauded the company’s vision for “transforming wearables.”

Fit Pay developed Pagaré beginning in August 2015, when the company participated in a hackathon sponsored by Pebble, which drew 70 developers who leveraged Pebble Technology’s APIs to create apps and hardware for its smartwatches.

Pebble welcomed Fit Pay’s idea and provided specs for Pebble’s suppliers and manufacturers to make sure the Pagaré would be a precise fit in the watch band spring clips built into Pebble watches.

Other developers have added payment capabilities to Pebble watches through software-based approaches, including apps for PayPal and LevelUp.

Over the last 18 months, Fit Pay set up the manufacturing for the Pagaré watch band and nailed down the payment details for its platform, including gaining certification from the payment networks, working through their tokenization platforms so Pagaré is accepted at any contactless payment terminal worldwide, Orlando said.

Pagaré designed a smartphone app to let users scan their card details. Issuers verify users automatically or via text, email or phone call if further account confirmation is needed, Orlando said.

Once connected to the Pebble watch, Pagaré operates completely independently of the smartphone app, Orlando said.

Looking to Kickstarter for Pagaré’s final funding push was an obvious move, because Pebble already had a connection to it, having previously raised more than $80,000 in less than two hours from about 80,000 backers in its own Kickstarter campaign in early 2015.

“Lots of people discovered Pebble in the first place through Kickstarter, so it made sense to go that same route,” Orlando said. “Pebble already has its own smartwatch fanbase, and when we learned its users are interested in adding payments, that was our cue to develop it."

The Kickstarter approach provides other benefits, including an element of what the supply chain industry calls just-in-time manufacturing, Orlando said. For example, during the final stretch of development this spring, the Kickstarter campaign will give Fit Pay the chance to tweak Pagaré’s production and design details based on demand.

“We’re analyzing the Kickstarter results to see which versions of the Pagaré band are in highest demand, and we’ll find out whether or not we need to support a thinner band for the ladies version,” Orlando said. Pagaré currently is compatible with the Pebble Time, Pebble Time Steel and the Pebble Time Round watches.

The Kickstarter campaign also could provide clues to reaching an international market for Pagaré.

Orlando, a longtime senior executive at CyberSource before Visa acquired it in 2010, also spent two years at payments startup Jumio Inc., before launching Fit Pay, and he’s optimistic about expanding contactless payments to wearables and other objects.

At least one analyst is skeptical about the theory that mobile payments adoption will hinge on specific devices.

“Wearables are a great fit for any use case where taking a smartphone out of your pocket takes longer than the task itself,” said Jordan McKee, a senior analyst with 451 Research.

But McKee expressed some reservations about Fit Pay’s intent to essentially charge consumers for mobile payment enablement, as he put it, because consumers are growing accustomed to having payments integrated into devices and operating systems.

“Charging for a peripheral add-on to enable payments is unlikely to resonate with a mass-market audience,” McKee observed.

Orlando is unfazed by doubters. “This is new territory for us, but we’re getting interest, which is promising,” he said.

And it's territory that others are exploring. Barclaycard charges a fee for its bPay band, and another Kickstarter project, the Kerv NFC ring, also has a price tag attached to it.

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