Will smart watches and glasses drive mobile payments?
- 14 April, 2014 10:42
Banking and payments are making a play to be killer apps for wearable devices, offering the possibility of paying with a wristwatch or glancing at one’s budget through augmented-reality glasses.
However, despite these kinds of apps begin to be rolled out, analysts remain sceptical that wearables will improve consumer adoption of mobile payments.
PayPal this month released an app for the Samsung Galaxy Gear II, a so-called smart watch. Other major companies developing financial apps for wearables include Westpac, Intuit and FIS. Also, startups including Sydney’s Pocketbook are hoping to make a splash by becoming early supporters of the trend.
Even so, analysts say it’s still early days and by no means clear whether wearable devices let alone wearable payments will find significant levels of consumer acceptance.
“Most of these developments are really just extensions of existing applications and programs and intentions to offer some support to a potentially big market,” Ovum analyst Gilles Ubaghs told Computerworld Australia.
“You won’t see any major investment or focus here until the market sees more actual usage numbers.”
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Paying with your watch on PayPal
PayPal is one of the first major payment companies to bet on wearables. The company has released an app for the new Samsung Galaxy Gear II smart watch that works in conjunction with the new Galaxy S5 smartphone.
The smart watch app lets users view their PayPal balance and recent transactions, receive location-based offers for nearby stores and restaurants, and pay in-store by checking in.
When users check in to a store, the merchant can see the customer on a point-of-sale terminal and charge purchases to the relevant PayPal account.
The Gear II app still relies on a connection to the user’s smartphone to work, with PayPal using the Galaxy S5 fingerprint scanner for authentication.
In 2010, PayPal processed $35 million in mobile payments in Australia. By the end of 2013, that had increased to more than $2 billion. PayPal believes that wearable computing could drive the figure even higher because it further removes friction from the transaction, says the company's head of communications in Australia, Adrian Christie.
“We’re going to see a change of form factor in the next five years, not just in how we pay but in how we consume,” he says.
“What we’re trying to do is listen to our consumers and see how they’re adapting. What we think about first is not doing what’s possible through technology but actually thinking about what a consumer would like to do and what will add value to the way they interact.”
While the Samsung watch is the first wearable to receive a PayPal app, Christie says PayPal is device-agnostic and the fact that its digital wallet is in the cloud means that the company can roll out to apps to nearly any piece of hardware.
“We believe in a future where consumers will want to access their digital wallet in many different form factors,” he says. “The goal is to be where the consumers are.”
Next page: St. George Bank and Pocketbook go wearable
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Eying your balance with St. George Bank
St. George Bank, a subsidiary of Westpac, is conducting trials with wearable devices including Google Glass.
Building banking apps for wearable devices is “all about being in our customers’ eco-system and making sure we’re able to deliver the service they are looking across a variety of channels,” according to St. George CIO Dhiren Kulkarni.
“It may not be the main platform people use to do their banking, but it is another option, and that’s what we’re about — customer choice,” he says.
St. George Bank sees wearable tech as effective for basic functions such as checking account balances and locating bank branches, Kulkarni says.
“We expect there will be a lot of people using mobile banking applications on wearable devices because it will help to make banking quicker, easier and faster.
“However, in most cases it will be a secondary device to a smartphone. We anticipate the bulk of transactions with still be completed on a smartphone and more simple tasks such as checking your account balance will be the more common transactions on wearable devices.”
The amount of information that can be displayed on a wearable is limited by its smaller screen size, notes the CIO.
“With this in mind, and from our trials, the type of information people will likely view on a wearable device needs to be simple and quick — such as checking your account balance or viewing a map to locate your nearest branch and ATM.”
Pocketbook
While St. George may currently see wearable as a secondary device, Pocketbook co-founder Bosco Tan says wearables may well replace the smartphone in the future.
The Sydney startup, which has a financial management website and mobile apps showing users all their bank accounts in one place, is currently experimenting with Google Glass.
Banks are focusing on the smartphone now because it is the dominant device for users, says Tan. But that could change in the future.
“I see [the smartphone] as the 'Generation 1' wearable,” he says. “Wearables are able to achieve potentially more than a smartphone because it’s more in context.”
By sensing where the user is and what they are looking at — and then bringing in picture and voice recognition — smart glasses can quickly provide the user with relevant information about what they are doing, says Tan.
Pocketbook is testing several concepts, including detecting that a user is looking at a potential purchase and showing the user whether it fits into his or her budget, as well as providing directions to the nearest ATM and quickly showing a bank balance when the user looks at a credit card.
Pocketbook is developing for Glass now because it believes that being one of the first apps available on the wearable will give the startup a competitive advantage, says Tan.
“We want to make Pocketbook like the Fitbit for your money.”
Next page: Analysts sceptical on wearable payments
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Are wearable payments really more convenient?
While wearable devices could move mobile payments forward, tech analysts say the future is not certain.
At best, wearables “provide a slightly different way to do something that could already be done,” says Ovum’s Ubaghs.
“There are use cases, but there is no killer application yet that is going to spur a major take-up aside from the usual tech fans and early adopters.”
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In addition, Ubaghs says hands-free payment systems using Bluetooth and cloud on smartphones might render moot any convenience advantage for paying with a wearable.
“There is a lot of potential for wearables to grow, but by no means is it a logical next step and it could easily be bypassed.”
IBRS analyst Guy Cranswick shares Ubaghs’ scepticism.
“The assumption is that if it is faster it will be more appealing and induce more use,” he says.
However, while wearables may allow for faster payments than other methods, people are not complaining about the speed of paying with cash, and success may depend more on overall convenience and the network of places where payments can be made, he says.
Actual use of wearables for payments may also depend on the type of purchase and the age group, with people under 30 the most likely to adopt this form of payment, he says.
“A wearable may act as a catalyst for some payments and among some age groups, but the difficulty here is that we are looking at future behaviour based on a technological feature and we can't know how that will turn out, soon, or over a longer time period.”
Ubaghs says smart watches will lend themselves better to mobile payments, at least initially.
“Watches and wrist bands which can tap a reader to enable payment are far and away the more likely initial form factor for wearable payments due to the fact they interact easily with existing contactless infrastructure.”
“Things like Glass however will need more development on the acceptance side as well and deeper integration into POS systems and services.”
Economics could be problem for Glass, he adds.
“The fact a glass payment is likely to be an over-the-air payment means it will get processed as a card not present transaction, and drive up fees for merchants even though the consumer is right there in front of them.”
Cranswick notes that there remains plenty of work needed to educate consumers that they can make payments using any kind of mobile device, even smartphones.
As evidence, he points to a current PayPal ad posted throughout Sydney that reads, “You may not know all the places you can use PayPal.”
“As a former ad man it’s obvious what the marketing problem is,” says Cranswick. “The market is not aware of where and how they can use the product.”
“It's a network and awareness problem which technology cannot change instantly.”
Adam Bender covers telco and enterprise tech issues for Computerworld and is the author of dystopian sci-fi novels We, The Watched and Divided We Fall. Follow him on Twitter: @WatchAdam
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