Why smartwatches are the real future of mobile payments

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It’s no secret that while smartphone adoption in the U.S. continues to rise –  now accounting for 57 percent of the mobile market according to comScore –  rollout of in-store mobile payments has been slow and fragmented. Some experts  attribute it to infrastructure challenges or hesitancy on behalf of consumers  due to security risks. Others suspect the market just isn’t ready

Despite these challenges, experts still predict that mobile payment adoption  is set to take off. According to research from Javelin, the total amount of  mobile payments at the point of sale will increase from $398 million last year  to $5.4 billion by 2018. But it begs the question: What’s going to drive the  drastic shift in consumer behavior that would lead to this market growth? The  answer: wearable technology

Mobile payments, as in payments made using your smartphone, have been slow to  take off, particularly in the U.S. NFC naysayers continue to suggest that the  answer lies in development of alternative technologies such as an enhanced,  low-energy Bluetooth solution that will make mobile payments a true, widespread  reality.

But, we don’t necessarily need a new technology to replace NFC. It works,  it’s incredibly secure, and it’s ready. Instead, we need a new kind of device  for which NFC as a payment solution truly makes sense for the consumer. We need  a wearable device.

Many predicted that Apple would incorporate NFC into the iPhone 5, but when  the company went with the new Passbook feature instead,  people instead took it as a sign that Apple still didn’t think the  market was ready for mobile payments. But, what if Apple realized more, that  their decision wasn’t a knock against NFC, or a sign that they needed a better  technology, but instead, that the smartphone as a device isn’t inherently  conducive to driving mass, in-store mobile payment adoption?

A wearable device, on the other hand, could be that solution. Whether Apple  puts out their iWatch tomorrow or next year, I’m willing to bet that a  transaction technology will be a key feature. If it’s tomorrow, that technology  is likely NFC. If it’s next year, maybe they will have cracked the code on an  enhanced low-energy Bluetooth that does it all. But for now it’s not really  about the technology — it’s about the device.

iwatch-prototype

The Year of Wearables

With the big players like Google, Samsung, Apple and most recently, Microsoft  announcing their plans to develop their own wearable devices, it’s clear why  many are calling 2013 the year of wearable computing. In fact, IMS Research predicts that the wearable technology market  will exceed $6 billion by 2016.

But in order for this movement to really stick and drive adoption among the  masses, the bigger players must add a new functionality to these devices that  would address a much larger market, a functionality that would not only suit the  tech-obsessed, but would make both a 20-something-year-old sibling and a  60-something-year-old mother run to the store.

When the iPhone was first introduced in 2007 it truly revolutionized consumer  behavior. Now if you walk down the street or look around you on a crowded subway  car, everyone around you is on his or her phone texting, reading, watching,  searching, and consuming. It’s a do-it-all device that so many of us have become  absolutely dependent on.

The smartphone has made such an impact mostly due to its design,  functionality and convenience. The iPhone in particular has such an intuitive  user interface, making it easy to navigate and even easier to get hooked on. In  order for a wearable to have a similar effect, it will need to do more than just  send alerts to your wrist.

The wrist-worn wearable device, because of its body positioning and therefore  its inherently advanced security, has the ability to make it the device that you  don’t leave home without — the device that could eventually replace the  smartphone. Combining the Pebble Watch and the FuelBand in a wearable to deliver  both alerts and activity tracking to your wrist-worn device has a certain  appeal, but in order to drive mainstream adoption, the new device needs a  technology that would extend its functionality and drive a similar shift in  consumer behavior caused by the iPhone.

Right now, NFC is the answer. It’s ready and it’s capable. It wouldn’t just  make this wrist-worn device a mobile payments solution, but would also allow  this “watch” to act as your bus pass, key card at work, open your garage and not  only unlock your apartment door, but your entire workstation. This is the  technology that could take smartwatches from cool-kid appeal to the mainstream.  It would not only drive widespread adoption of wearables but also drive adoption  of in-store mobile payment solutions.

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