Are Wearable Payments the Next Disruption for Banks?
Wearable payments will be one of the ways bank customers do transactions in the future.
It is all about convenience and the speed of the transaction. We love to wear technologyjust look at the number of GPS watches and fitness trackers in sporting store catalogues. This is why customers will expect their bank to provide innovative wearable payments methods to make their lives easier.
Banks and other financial institutions are at the crossroads in the rapidly changing digital world. The advent of Internet banking in the late 1990s has resulted in a decline in branch transactions. Mobile banking is just adding to the rate of change in the banking and payments landscape. Some banks already process more transactions via mobile devices than their complete branch networks.
This digital disruption has caused a dramatic change in the function, purpose and design of branches, which have been the primary distribution and payments channel for banks over nearly a thousand years. This change has happen in just over a decade.
By 2025 there will be practically no transactions done in bank branches. Branch distribution channels will have a vitally important roleit just wont be doing transactions.
So how will bank customers execute transactions by 2025?
Wearable payments will be one of the ways bank customers do transactions. It is all about convenience and the speed of the transaction. We love to wear technologyjust look at the number of GPS watches and fitness trackers in sporting store catalogues. This is why customers will expect their bank to provide innovative wearable payments methods to make their lives easier.
The Internet and mobile banking revolution has been driven by one key elementcustomer convenience. Payment simplicity is the most valued attribute by retail customers. Its not about the technologyit's about the customer, their expectations of convenience and their appetite for change.
Payments are an ecosystem with three major components: the merchant, the buyer and a method of payment. The ecosystem that brings these three components together varies in different parts of the world which will result in different solutions to wearable payments.
For example, in Australia contactless merchant terminals and contactless cards are common place. Card scheme rules are designed to provide a low friction ecosystem for small value payments in lieu of cash transactions. The environment has allowed Heritage Bank to embed payment technology into business suits as one of the first examples for wearable payments.
Embedding micro sized Near Field Communication (NFC) cards into clothing is easy technology to deploy for innovative banks partnering with progressive clothing manufacturers of business attire, cycling clothing and sportswear. What could be easier than making payments with something you wear?
Of course clothing is not the only wearable payment method. Watches, glasses, rings and wristbands are all vehicles for embedding payment technology. The adoption of these technologies will depend on the specific payments ecosystem within different regions of the world. As great as Google Glass is, I dont fancy banging my head on a contactless payment terminal in Australia just to make an NFC payment. Remember, customers want simplicity.
Technology companies are now designing solutions specifically for the wearable market. Google has announced Android Wear which is an operating system designed for wearable devices. This provides the solid platform that developers need to innovate and deliver customer focused wearable transaction solutions.
What about mobile payments? The problem with mobile payments is they require a mobile which is roughly the same size as a physical wallet. Why is that more convenient for the customer?
The job of the payments industry is to provide the convenience transaction methods that our customers want. Wearable technology will certainly be one of those methods and it does have a role to play in the digital disruption of banking services.
John Williams is the chief operating officer of Heritage Bank in Australia.