In fact, a recent CXOtoday.com article cites research by Tractica that estimates exponential growth in the wearables market – from $3 billion in worldwide payment transaction volume in 2015 to more than $500 billion in 2020.
And while this hot new technology trend is capturing headlines and imaginations, the question remains: What exactly are wearables, and how do they fit into the payment industry?
“When it comes to payments, wearables today are an accessory to the smartphone,” said Terrence Griffin, Chief Information Officer for CO-OP Financial Services. “They extend the capabilities of the phone in much the same way Bluetooth does. Because these devices are going mainstream with consumers, it is important for credit unions to understand how they work today and how they might evolve in the future.”
Apple and Samsung Lead the Market – For Now
In the payment wearables market, Griffin notes that two products dominate today’s landscape: Apple Watch and Samsung Watch. He expects that dynamic to change in the near future.
“Today, a payment wearable is still a luxury item for most consumers,” he said. “However, new products will continue to enter the market, driving price points down and making the technology more accessible to the average consumer.”
One trend Griffin expects to see unfold is for providers of health and fitness wearables to build a payment component into their technology. “Customers of these companies will be asking for the technology if they aren’t already because consumers today place tremendous value on convenience,” he said. “For example, if I already have my fitness wearable on when I leave the gym, why wouldn’t I want to use it to pay for my dry cleaning on the way home? So we may see companies like Fitbit enter the payments industry, and soon.”
According to Griffin, one reason consumers are so quick to embrace payment wearables is their processing speed. “Wearables not only allow consumers to pay for goods and services without reaching for a phone or wallet, but they also complete transactions instantly, with a single click,” he said. “Compare that to a typical mag stripe transaction that takes three to four seconds to process, or an EMV card payment that can take seven seconds or longer to complete. By all measures, wearables deliver on their promise of convenience.”
And not just for consumers. Griffin emphasizes that they offer efficiencies to merchants as well.
“Most new, upgraded payment terminals being installed by merchants today for EMV compliance also feature near field communication (NFC) technology, which allows them to process a wearable payment,” he said. “The irony is that NFC may be operational on many of these terminals before EMV because NFC is relatively easy to enable. By contrast, getting an EMV card reader up and running can be complicated, requiring complex software development on a merchant’s backend systems.”
The Importance of Educating Your Staff
So what should credit unions be doing today to capitalize on the wearables revolution?
“First, they should consider supporting the technology through a platform such as Apple Pay. Second, and this point is equally important, they need to educate their employees,” said Griffin. “If I am a member of your credit union and I purchase an Apple Watch, I may have a lot of questions for your staff on how to use it securely at checkout. Your member services team should be well versed in the technology and ready to engage with members on the subject.”
He continued, “The popularity of wearables speaks volumes about where payments are headed. Credit unions that embrace the trend and prepare for this new wave of technology will serve their members’ interests well and will position themselves for future success.”