Slideshow 9 Problems with Wearable Payments

  • July 02 2015, 11:01pm EDT
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As wearable devices like the Apple Watch gain an audience, banks and retailers are exploring ways to make the most of this new style of consumer technology. But a number of hurdles stand in the way.

Designing in the Dark

Apple is notoriously secretive about unreleased hardware, and did not provide early developers such as USAA with pre-release versions of the Apple Watch. "The hardest part of developing the app was testing on the simulation software instead of the actual device," said Neff Hudson, head of emerging channels at USAA.

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Pricing Pressure

Consumers are willing to pay hundreds of dollars for an Apple or Android smartwatch, but what will they pay for a wristband that only does payments? Barclaycard sells its new bPay band for £24.99. In testing, the bPay band was free, but Barclaycard insists its commercial version is still cheaper than nearly any other wearable device.

Covering Up

Another inventive Barclaycard wearable is its payment-enabled wool glove. It seems like a good fit for colder regions, but by design it covers up the user's hands, thus preventing consumers from using other payment systems that employ fingerprint authentication, such as Apple Pay.

App Overload

To be the first issuer with an Apple Watch app, Citi had to split its mobile strategy by requiring smartwatch owners to download the wearable app separately from the bank's iPhone app. Citi rectified this on July 1 by offering a combined app, but until that time mobile users had to jump through an extra hoop to bank from their wrists.

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Size Matters

Citi has three design principles for the ultra-small screen of the Apple Watch: intimacy, importance and immediacy. Anything that doesn't fit those principles is wasting precious screen space on the customer's wrist.

Going Down with the Ship

No amount of software ingenuity will help an app if the wearable device it's built for gets pulled from the market. This was the case for Google Glass, and the U.K. retailer Tesco had the odd distinction of releasing its innovative Glass app just days before Google stopped sales of its high-tech headset.

Red Tape

Adding payments to a wearable device requires more effort than simply writing an app. The NFC Ring, for example, launched without EMV certification from MasterCard and Visa, and thus could not be used for card payments (though it could be used as a Bitcoin wallet).

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Single-Account Devices

Want a payment-capable watch but can't afford the Apple Watch? Watch2pay might be an option - but only if you use a compatible account. In the U.K., it's sold with a prepaid MasterCard PayPass account; in other regions the Austrian company partners with local banks.

Room for Improvement

Wearable devices still require the user to interact with hardware in some way, and thus there is still friction in the payment process. Bluetooth beacons, which are used primarily for marketing by communicating with a shopper's smartphone app, could make it possible to accept a mobile payment without the consumer taking out the phone (or smartwatch) to pay.