Wearable payments gather speed

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New payment technologies such as Apple Pay and FC Barcelona wristbands carrying a digital wallet will increasingly mean bank customers ditch cards and cash for wearable technology, experts predict.

Watches, wristbands, jewellery, keyrings and other wearables, as well as mobile phones, are expected to follow a surge in tap-and-go payments in countries where card issuers, banks, retailers and consumers have embraced the technology.

Some 75 million wearable products are expected to be shipped this year by people looking at alternatives to tapping a card on a merchant's terminal, more than double the 29 million shipped last year, according to technology research firm CCS Insight.

"People want to tell their payment provider how they want to pay and not be told in the traditional way of 'here's your plastic, now get on with it'," said Howard Berg, senior VP at Gemalto.

Gemalto, a digital security firm best known for making SIM cards, issued its first payment wristband last year and expects to distribute hundreds of thousands in Britain alone this year.

CCS Insight predicts the spike in wearables this year will be followed by shipments more than doubling again by 2018, leading to over 340 million wearable devices in use. Most will be smartwatches and wristbands, though payments will also be made via wearable cameras, jewellery, tokens and eyewear.

"Payments is a really key element in the direction of technology at the moment. There are lots of companies trying to crack this nut, and the key is it needs to be secure and easy," said Ben Wood, analyst at CCS.

The Apple effect

So far, much of the shake-up in payments has been in how transactions are processed, far out of the sight of customers, but the rollout of Apple Pay in the United States in October and in Britain this week has thrust the way consumers pay into the spotlight.

The "Apple effect" can often help rivals, too, and some expect the launch to mark a tipping point for contactless payments.

BPay, launched last month by Barclays' credit card division, offers users options to put a payment device on a wristband, a keyring or a sticker that can attach to a device such as mobile phone, though it is charging for each one.

Growth in wearables is likely to be led by countries where contactless payments have already taken off, given they use the same terminals. Some European and Asian countries look set to lead.

MasterCard said contactless card growth is running at 70% a year, and Australia is leading the way with 69% of its transactions now contactless.

Visa Europe said its cardholders spent EUR1.6 billion using contactless payments in March, a threefold increase on a year earlier led by users in Britain, Czech Republic, France, Poland and Spain.


One in 10 contactless payments in Britain is on London's public transport system, where 625 000 tap-and-go payments are made each day, not counting prepaid Oyster cards.

Wearables will range from high-end watches costing more than $1 000 to throwaway wristbands made for less than $3.

Wristbands could increasingly displace cards on buses and at underground stations where people may prefer not to take out a wallet or phone. They are also taking off as digital wallets at festivals, holiday resorts and sports events. Disney, for example, launched MagicBands for its parks in late 2013.

"It's a very socially accepted place to wear something and therefore it's a very good place to put a payment mechanism; it's almost a frictionless payment," CCS's Wood said.

Because most contactless devices or cards can be used by anyone if they are lost or stolen, many countries cap the amount per transaction.

While consumers may benefit from ease of use, banks, merchants and venues also stand to benefit as there is evidence more is typically spent with wristbands than cards, while they could also get access to valuable data on customer behaviour.

Banks are also on the lookout for brand benefits from teaming up with popular teams for their wearables.

Spain's Caixabank, which distributed 30 000 wristbands last year, is offering ones with FC Barcelona branding this year, although the Barcelona-based bank is yet to offer them in the colours of arch-rivals Real Madrid.

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