In the short history of wearable payments, the form factor's limitations have become clear. They work well enough in environments where they have no real competition — like Disney World's MagicBand — but prove costly and complicated when brought to a wider market.

The Holy Grail for wearables may be a payment-enabled ring, which would allow users to wave their hands like a Jedi over a contactless card reader, without having to ever reach into their pockets for a wallet or a phone. But to most consumers, Jedi payment powers haven't been compelling enough to justify the steep cost of a piece of jewelry that's focused more on function than fashion.

Visa, Mastercard and others have sought to address this by working with fashion designers to make their payment rings more stylish. The startup Token, however, is pushing in the opposite direction by launching a chunky, utilitarian ring that goes overboard on what it can do for the wearer.

The approach is reminiscent of Amazon's Echo devices, which are bland monolithic speakers that can be loaded with "skills" to enable them to place calls, make purchases, activate light switches and tell jokes.

Even in Token's promotional photos, the ring is a hefty lump of metal that dwarfs the model's wedding band:

The Token payment ring
The Token payment ring

But what Token's ring lacks in beauty, it makes up for in brains.

Token is working with card networks, mass transit agencies and providers of both physical and digital security to develop a biometrically activated ‘swiss army knife’ of RFID connectivity. Out of the gate, Token is designed with multiple functions such as password storage; physical access to buildings, cars and networks; and interoperability with NFC enabled payment cards and mass transit networks.

New credentials are loaded via the accompanying mobile app, and like Amazon's Alexa app, this provides the ability for Token to grow as other credentials such as passports and driver's licenses become digitizable. The value proposition for Token is primarily about security.

“As the way we prove who we are keeps becoming more and more digital, security becomes much more important and how we do this authentication ritual becomes very important as well," said Steve Shapiro, Token’s CTO.

Token's biggest competitors, including NFC Ring and Kerv, have been slow to catch on in the market despite working with the card networks to perfect their uses as payment devices.

But according to Shapiro, wearables' issues are little different from those that mobile wallets face.

“When you look at just the payments space, Apple Pay came out and everyone had all these high hopes and the adoption has been really abysmal, it’s something like under 5%," he said, "and the reason is, they’ve made payments more secure, but it’s not more convenient. While credit card companies care deeply about security, consumers care deeply about convenience and these are really ingrained habits.”

Combining two factor authentication (2FA), always-on functionality and a form factor that is at your fingertips, Shapiro may have a point about the ring’s convenience over cards, cash and phones.

“We think about UX pretty much the most," Shapiro said. "The fact that it’s something on your hand and you don’t have to reach for it and the fact that the two factor authentication is continuous as long as you’re wearing it means it’s only one step to perform a transaction and that’s what we think is the tipping point to get people to change their behavior.”

The ring itself is a 2FA device, scanning a user's fingerprint whenever it's put on to satisfy card network requirements for authentication; the ring also detects when it is being removed, so it can't be misused if lost or stolen. This extra security allows Token to avoid capping POS transactions at $25.

At $250 for the ring itself, Token may be a hard sell for the common consumer, who already has similar capabilities built into their smartphones and Apple watches. Shapiro acknowledges this challenge: “It’s a new category of product so we have a lot of education to do.”

Token's entire value proposition depends upon relationships with third parties, which must develop relationships and use cases to support the use of the Token ring. If one or more of these fall apart, then so does the value proposition.

Further, these need to be sustained and nurtured over time. Building the product is just the first step - building the support system that will enable it to flourish will take a lot more work.

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Nick Holland

Nick Holland

Nick Holland is a senior analyst at PaymentsSource. He has previously held analyst roles at Javelin Strategy & Research, Yankee Group and Aite Group.