High-tech cards have struggled to gain traction as a distinct, offline and often expensive consumer gadget for storing and protecting multiple payment accounts. But the pervasiveness of Internet access points and Internet-connected devices could give some of these gadgets fresh appeal.
Stratos is using a recent investment to build a card that will act as a traditional plastic card at the point of sale, but will store a number of payment and loyalty cards. The model has been attempted in the past by companies such as Coin and Dynamics, but has not garnered a lot of adoption thus far.
But Thiago Olson, CEO and co-founder of Stratos, expects the proliferation of wearable computing and other Internet-connected devices to attract consumers to this type of card, which is more familiar as a payment instrument than a wallet app.
"The smartphone is like a Swiss Army knife," Olson said. "You can do a whole lot of things with it, but it doesn't excel at any one thing. The move toward connected devices will create devices that specialize in specific tasks."
The Stratos card will depend on a Bluetooth connection to a smartphone, rather than try to shoehorn all of its functionality onto the phone itself. This is similar to how many smartwatches operate; Google's Android Wear watches, for example, rely on a phone to run apps and connect to the Internet, while the watch performs only the functions that make sense to have on a watch's face.
To test Stratos' thesis, the company commissioned research from AYTM of 400 smartphone owners between the age of 24 and 50 on Dec. 31, 2014.
The survey found 30% of U.S. smartphone owners also own a wearable device, with wristbands such as Fitbit or Jawbone being the most popular at 53%. The research also suggested people wish to use a connected device that is familiar to them. Given the choice between a mobile device, smartwatch or connected card, 49% chose the card, with 32% choosing the mobile device, 9% a watch and 8% a wristband. Less than one percent chose paying by a "connected shoe" or clothing.
Analysts were less enthusiastic about Stratos' thesis. The same argument that has held back mobile wallets that consumers are comfortable sticking to their ordinary plastic cards also applies to the concept of a high-tech, multi-account card.
"It seems to me that people will either keep using the cards they have now or move to the mobile platform," said Thad Peterson, a senior analyst at Aite Group. "The number of people who would migrate from traditional to connected cards might be limited."
The market first has to get the current generation of phone-based contactless payments to scale and that will take a while, Peterson said. Once that's done, consumers may have more enthusiasm for a connected payment device, but there are other options besides a card.
"I would think that the watch would be the form factor of choice," Peterson said. "It is familiar to users and it could actually make the user experience even simpler than Apple Pay with a mobile phone."
Apple has already signaled that its upcoming Apple Watch will support Apple Pay.
The key for wearable contactless payments is the ability to easily present at the point of sale, said Michael Misasi, a research analyst at Mercator Advisory Group.
"A watch, a bracelet, ring or glove is going to be much easier to use than a shoe," he said. "But in the case of card-on-file payments that are authorized in-app and then executed by geolocation, for example, the locating chip could be embedded anywhere but the cell phone remains the most practical option."