EXCLUSIVE: “Getting Closer” – Terrie Smith, DIGISEQ in “The Fintech Magazine”

Terrie Smith, co-founder and global ambassador of wearable tech pioneer DIGISEQ, on why issuers should open their eyes to a new dawn in wearable payments

The age of contactless payments has arrived. Now accounting for more than 50 percent of all POS transactions worldwide, contactless technology has evolved to become even more efficient, affordable and user-friendly, with wearable payment technology leading the way among a host of new services coming to market.

Mobile POS (mPOS) services – such as Apple’s Tap to Pay – enable millions of merchants, from small businesses to large retailers, to convert their iPhones or iPads into POS devices that can accept contactless payments, digital wallets and all wearable technologies. with a single tap – without the need for specialized POS terminals or hardware. In fact, it is estimated that there will be as many as 34.5 million merchants using mPOS solutions globally by 2027.

The continued convergence of contactless and mPOS is music to the ears of banks and issuers aiming to capture more contactless transactions through their mobile banking apps and digital wallets. In the UK alone, new data from Barclays – which sees almost half of the country’s debit and credit card spend – reveals that a record 91.2 per cent of all eligible card transactions were made using contactless payments in 2022, a sign that consumers and businesses are continuing to shift to next-generation technology when buying and selling.

With merchants in all industries adopting mPOS solutions, wearable technology is being pushed into more applications, use cases and areas where until recently only cash could be used.

When the first contactless payment card was introduced to the UK market in 2007, users could only make low value purchases of £10 or less – ideal for fast food restaurants, coffee shops and other perishable goods that can be bought on the go. However, subsequent increases in the contactless limit have enabled customers to use contactless to pay for more expensive items from a wider range of in-store retailers.

It is now possible to use contactless to pay for weekly grocery runs, fill up with petrol and make large purchases in other stores. According to data from UK Finance, the average contactless payment rose by around 30 per cent when the £100 threshold – which replaced the previous limit of £45 – was introduced in October 2021. Even when comparing 2022 to the contactless transactions made in end of 2021, after the higher £100 limit was introduced, transaction values ​​were still 5.3 per cent higher than 2021’s figure.

In the past, many banks and issuers were reluctant to fully explore wearable technology due to misconceptions about cost and complexity, with hesitation costing them both valuable transaction growth as well as potential new customers.

This reluctance to test wearable technology can be largely attributed to past failures. Heralded at the time as the next contactless revolution, the best-known example of this is arguably the introduction of the bPay brand by Barclaycard in 2014. With bPay, users had to buy the wearable device, place the chip in the item themselves, download an app, register the device, and then transfer money from a separate account to make a payment. Subsequently, due to this convoluted and fragmented approach, attracting new users proved extremely difficult.

“It is now much easier, faster and cost-effective for banks to get wearables into the hands of their customers and give customers almost unlimited options for how they make payments”

Perhaps even more important is the fact that Barclaycard refused to enable Apple Pay, which launched around the same time. With the ability to connect all debit and credit card payment methods in one wallet – on phones and smartwatches – both Apple and Google Pay quickly caught the attention of consumers, and as a result the banks suffered defeat in the opening battle of wearable technology and mobile. wallets, with bPay eventually being phased out.

GIVE THEM WANT THEY WANT

So, what’s behind the current boom in wearable payment technology? And why are wearables once again capturing the imagination of banks and other businesses?

It is clear that consumers want more portable, fashionable and practical products that support contactless payments. The last 10 years have shown how quickly people got used to linking their cards to mobile wallets, smartwatches and other active wearable devices. However, the convenience of these devices is somewhat limited by battery life. By moving to passive objects that do not require a battery to function, wearable technology has been able to tackle this problem head on.

Today, a contactless chip can be built into a ring, a bracelet and even a piece of clothing. This chip can then be linked to a cardholder’s bank or prepaid account and instantly activated using an iPhone or Android device. We are now witnessing wearable technology becoming more ambitious and more attractive to customers as contactless technology becomes smaller and smarter – as seen by the rapidly growing range of high-end designer fashion items that also function as contactless devices.

In addition, it is now much easier, faster and cost-effective for banks to get wearables into the hands of their customers and give customers almost unlimited options for how they make payments. Previously, all chip-enabled goods that required personalization had to be supplied with client data by the manufacturer before going back to the bank and finally being delivered to the customer – a labour-intensive, costly and time-consuming process.

Without the bank having to lift a finger, today’s wearable technology solutions can handle payment activation from start to finish at a significantly reduced cost. Using over-the-air remote provisioning, payment information can be sent to any portable device directly from the customer’s Android or iOS mobile device, wherever they may be. This enables users to immediately connect the payment card to their portable device and start using it.

Globally, there are more than 2.5 billion active Android users and 1.5 billion iPhone users, thus providing a significant opportunity for wearable technology to become an integral part of people’s daily lives. The banks also have access to a wealth of real-time data on client behaviour, and can even send customers exclusive offers and incentives to increase spending with trading partners. With the knowledge that their contactless transactions are protected and tokenized in the same way as NFC mobile payments, users can also monitor their activity while receiving instant transaction alerts.

With the global size of the wearable payment device market projected to reach $82 billion by 2026, growing at a CAGR of 13.6 percent over the forecast period, the Internet of Things is also expanding rapidly—integrating access control, brand customer engagement, and payment applications across 5G and Wi-Fi, and an estimated 41 billion devices by 2027.

This increase is likely to be heavily influenced by the potential of wearable technology to foster much more immersive bank-customer connections and engagements. Wearable technology opens doors for banks and financial institutions that want to reduce expenses and develop stronger relationships with their customers. Now is the time for banks to seize the once-in-a-generation opportunity offered by wearable payment technology and, literally, get closer to their customers.

This article was published in The Fintech Magazine issue 27, pages 30-31