Payment authentication is forcing smartwatches to get smarter

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Nok Nok Labs and Apple are separately trying to improve authentication techniques as smartwatch payment options stack up.

In Nok Nok’s case it has built a software development kit for smartwatches to provide FIDO-based authentication. And Apple has filed a patent application for technology that supports secure information transmission.

Both companies are responding to watches and other connected devices becoming more usable for transactions, and more distinct from other consumer gadgets. Apple's watch update, for example, allows the Apple Watch to operate independent of the iPhone, supporting untethered App Store access.
“There is a clear trend toward putting more complexity into the smartwatches,” said Rolf Lindeman, vice president of product for Nok Nok Labs. “Consumers, particularly younger consumers, want to leave the phone in their pockets.”

By tying the technology to FIDO, a member-based organization that supports standards and testing for interoperable payments technology, Nok Nok hopes the smartwatch SDK will produce intuitive authentication across mobile apps, desktop computers and smartwatches, without relying on one device to authenticate the other.

"You want to do what you can to avoid any extra steps for authentication," Lindeman said.

Nok Nok was a founding member of FIDO, and has worked within the organization to add Apple’s biometric security. Nok Nok did not answer questions about work with Android via its new SDK.

Apple Watch sales are up, though it has increasing competition, feeding a functionality arms race that also requires better security. Google recently agreed to acquire Fitbit, a $2.1 billion deal that will allow Google to add Fitbit Pay-enabled devices to the search giant's range of payment apps and wearable technology. Apple Watch is also expanding, recently adding support for B2B payments through a partnership with BofA Merrill Lynch.

Other financial institutions are adding wearable payments options. BNP Paribas recently announced support for payments on Fitbit and Garmin devices, adding it to contactless options such as Apple Pay and Google Pay.

And Garmin Pay recently added a prepaid account through a connection with London-based Prepaid Financial Services.

Apple has been updating its biometric protections, improving the user experience for Touch ID and Face ID, for example. Apple’s more recent patent application, which is distinct from Nok Nok's FIDO SDK, references improving data security for collection, verification and authentication with “respect to obtaining and transmitting identity information.” It also refers to identification credentials received by a first device from a second device, supporting a potential secure communication channel between the two devices.

Apple did not return a request for comment. The technology Apple’s describing could support a federated identity system, a key element of the portable, sharable digital ID methods that are required to execute digital payments within the same environment as building access or general identity. The technology could also support different Apple devices, such as its watch or iPhone.

The Apple patent surrounds the use of wearables and/or smartphones as an authentication form for what could be a national ID, said Trace Fooshee, a senior analyst at Aite.

“National ID isn’t something I would have thought Apple would be into," Fooshee said. "I can see them wanting to control more of the authentication space and I think that they, along with their competitors, would be well positioned to provide platforms for authentication applications like Touch ID, Face ID and others."

Apple’s move would be similar to the other biometric authentication applications insofar as it would be a means of closing the last mile of the authentication loop but not go much further than that into the loop, according to Fooshee.

“I could even see them creating another biometric authentication application that would be similar to Touch ID and Face ID, but that is specific to the signals that Apple Watch is able to accumulate,” Fooshee said.

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Wearable payments Digital payments Internet of things Apple Garmin FIDO