As Apple and the Merchant Customer Exchange battle it out over smartphone-based payments, Royal Bank of Canada and MasterCard are jumping past the phone to cement their roles in the fast-growing market for wearable payments.
Well ahead of the launch of the Apple Watch, companies such as Barclays, CaixaBank and Walt Disney are issuing payment-capable wristbands to their customers. Disney in particular has had success with this effort, with half of Walt Disney World patrons using its payment-capable MagicBand. Meanwhile, Microsoft is pushing to make consumers think of its newly launched Band as a payment device by packaging a $5 Starbucks gift card to link to the device's Starbucks app.
But while Apple and other mobile wallet developers companies are edging out mainstream financial companies, MasterCard and RBC's new product, the Nymi Band, returns control of the customer relationship to issuers.
Some banks have balked at the terms Apple requires for participation in its mobile wallet. Other mobile payment systems, such as the MCX CurrentC wallet, are designed to cut into bank revenue by favoring payment methods that are less costly to the merchant. The Nymi band, developed by Bionym, can instead be the foundation of a bank's mobile wallet system.
The band includes a built-in heartbeat sensor that provides authentication for contactless payments (a similar technology will be used in the payment-capable Apple Watch). RBC and other MasterCard issuers will test the technology with consumers in an upcoming pilot.
"Wearables may change the payments experience, and within our Labs team, we're looking at a number of options in this space, especially as we think about how the consumer experience is going to continue to evolve," said Stephane Wyper, vice president of MasterCard Labs, in an email.
Bionym is selling the wristbands for $79 as part of a preordering campaign. RBC will enroll consumers, though the branding for the watches or apps has not been determined.
The bands will be matched to the user's heart patterns, so only that person can use the watch, removing the need for other identification. The watch is activated when the user puts it on, and includes an NFC chip to communicate with contactless payment terminals. "Anything that involves taking something out, such as a phone or a fingerprint scanner or a password, will never be as good as simply waving your wrist near a point of sale system," said Balaji Gopalan, director of platform at Bionym, who said the initial pilot will take place in Canada, though the company is pursuing other issuers in other markets.
While the pilot is focused on payments, the band is being developed to include other capabilities.
That will be key to the success of watch payments, said Thad Peterson, a senior analyst at Aite Group.
"It would have to do a great many things beyond payments to get me to make a fashion choice to wear it," Peterson said. "Apple Watch appears to have the incremental functionality, which gives it potential."
Mobile and wearable payments will also benefit from the U.S. shift to EMV-chip cards, said Michael Misasi, a senior analyst at Mercator Advisory Group.
"The U.S. is starting to move to EMV, which will increase contactless acceptance," Misasi said. "And the constant data breaches are making consumers more concerned about security."