Wearable devices are quickly going from novelty to mainstream.
The boost of wearables also has significant potential to drive mobile payment adoption. This potential is based on the ability of wearables to expand the number of devices and places from which mobile payments can be made.
Shipments are expected to jump 133 percent in 2015, according to IDC, while the volume of wearables capable of running third-party applications, known as smart wearables, could grow an astounding 510%. With increased adoption and usage come greater implications for financial services, such as enabling transactions and delivering alerts.
One of the factors inhibiting adoption of mobile payments is the lack of added value to users – mobile devices offer a different way to make a payment, but if it is not significantly easier, quicker or more secure than swiping a card consumers have little incentive to change their current behavior.
Fiserv research shows security remains a top concern for consumers when it comes to mobile banking and payments, and wearables can address this concern. Tethering a wearable to a smartphone or using geolocation capabilities can ensure the wearable device from which a payment is being made is in the same location as the owner’s mobile phone. If both are present then it is less likely that the device from which the payment is being initiated is stolen.
This requirement makes it even harder for criminals to make fraudulent payments. The added security benefit makes mobile payments via wearables an attractive alternative to consumers as it’s just as easy as swiping a debit or credit card, but more secure.
In the simplest sense, the emergence and swift adoption of wearables means there are more connected devices through which a person can make a mobile payment. Consumers today have multiple mobile payment options and choices, with smartphones, tablets and wearables all offering a range of payment functionality.
Fiserv research shows 68% of households own a smartphone and 48% of those individuals accessed their banking information on their smartphone in the last month. We expect the mainstream adoption of wearables to result in similar usage. The more mobile-payment-enabled devices a consumer owns, and the more convenient they are, the more likely that consumer is to actually make a mobile payment.
While most discussion around mobile payment in the industry is focused on payments at the point of sale, wearables could drive mobile payments of all kind, due to the compact nature of the devices and ability to deliver quick, simple messages. The primary use case for wearables in banking is currently with alerts, such as when users receive up-to-date notices when balance thresholds fall, a bill is due or when a check clears.
These alerts often spur transactions, such as a bill payment to a vendor, or the transferring of funds between a checking or savings account. In this way, wearables present the opportunity to motivate a wider variety of mobile payments than a smartphone digital wallet.
These devices present new opportunity for financial institutions to connect with their members and enable them to easily conduct important financial transactions during their day to day life. With advantages in security and the shift to making mobile payments beyond the point of sale, wearables have the possibility of bringing mobile payments to homes and businesses everywhere.
Andrew Barnett is principal digital banking consultant at Fiserv.