Author: Eric Wilson, firstname.lastname@example.org
Wearable technology is all but certain to become a big factor in how people interact with the world around them. And, with the Apple Watch scheduled to begin shipping later this week, this evolution seems likely to happen very quickly. Of interest to banks and credit unions, experts expect payments to be one of the applications particularly suited to wearable devices. Obviously, the Apple Watch will support Apple Pay, but other key players are also jumping in to extend their payment offerings to wearable devices. For instance, Jawbone just announced that their Up4 fitness tracker bracelet will support NFC payments through a partnership with American Express.
As wearables increase their presence in the market, the race to create innovative solutions that capture the demand of the growing population of tech savvy users will undoubtedly escalate. So, what impact will the influx of new payment-enabled wearable devices have on financial institutions, especially in the consumer payments space?
Wearable technology is an extension of a user’s digital network.
Gone are the days when new digital devices are heavily adopted because they improve their non-electronic predecessor’s specific function. One of the least important duties performed by today’s smartphones is to serve as an actual phone. In the same way, smart watches will no longer be primarily used for keeping track of time. Instead, they will become an instantly accessible extension of a user’s primary digital device.
In the future, integration into a user’s personal digital network will be an absolute requirement for new devices. In the wearables arena, the better a device improves a user’s ability to interact with their existing digital world, the more likely it is to provide added value. Connected devices are already improving our everyday lives, and the possibilities for innovation are endless.
From a payments perspective users will continue to choose the most convenient mechanism. If putting their wrist close to an NFC device or nodding their head to approve a payment can replace carrying a physical wallet and swiping a plastic card, users are likely to adopt these methods. Even so, new devices will only gain traction if they support the user’s existing financial tools and effectively extend their existing digital network. In short, wearables may be new, but their future as a payment method is dependent on how well they integrate with existing technology systems and payment channels.
Increasing utility is a major factor for motivating users to shift towards new payment mechanisms.
People only modify their habits and behavior when there is adequate incentive to do so. Because wearables are quite literally bound to users directly, and because they are instantly accessible without having to dig them out of a pocket or a purse, they have the potential to make it easier to pay. But in today’s smartphone-savvy world, users expect simple, elegant solutions, so there’s a high bar for the adoption of new devices. While it seems intuitive that users could access wearables more easily and employ them more effectively than devices that have to be carried around, solutions like the Apple Watch must actually improve the payment experience before they will be widely seen as a viable payment method.
Improving the payment process doesn’t have to be all about saving time. Wearables could also enhance the payment experience by giving customers quicker access to useful information in a way that helps buyers make better purchasing decisions. And merchants should be motivated to engage wearables to improve the payment process, because statistics show that when users have a more fulfilling experience, they spend more!
It’s not about the payment, it’s the experience.
My vote for the most innovative wearable available today is Disney’s MagicBand!
As the article states:
“There’s no need to rent a car or waste time at the baggage carousel. You don’t need to carry cash, because the MagicBand is linked to your credit card. You don’t need to wait in long lines. You don’t even have to go to the trouble of taking out your wallet...”
In the ideal shopping experience, the payment process is invisible. Once they’ve made their purchasing decisions and filled their shopping carts, most buyers are ready to be finished–but the payment process hasn’t even started yet. From a consumer’s perspective, if they have to think about the payment process it’s already too late for it to be an ideal experience.
One of the many geniuses behind Disney’s MagicBand is that it incorporates the payment into the overall experience. MagicBand provides an all-in-one device that allows you to use the sensor in the wrist band to do everything from accessing popular attractions to entering your hotel room or buying food and merchandise at park stores. If financial services providers want to improve payments, they need to find similar methods to remove friction from the process. Wearable devices have an opportunity to make an impact by removing some of the physical friction that occurs during those key moments at the point of sale.
Financial institutions should leverage wearables to make payments simpler.
Banks and credit unions have traditionally been successful at introducing new technologies into the financial services arena. More and more, consumers are using mobile devices as a means to view account information, transfer funds, and perform increasingly complex banking activities. These new technologies have been a critical factor in keeping up with users’ evolving needs and expectations.
In the same way, financial institutions should consider wearables as the next logical step in the merger of services and technology. Leveraging wearable devices to create a better, more seamless payments experience could be a critical factor in how well FIs will continue to meet consumers’ demands.
Has your FI started conversations about incorporating wearables into the payments process? I’d enjoy hearing your thoughts.