Wearables in Payments

Apple’s recent announcement of their iPhone 6, iPhone 6 Plus and their new payment platform Apple Pay™ somewhat overshadowed another important product roll-out – the Apple Watch.

The Apple Watch is Apple’s introduction to the wearables industry. Wearables are computing devices that people actually wear either under clothing with sensors or as accessories. Most wearable products never leave the concept phase, but with products like Fitbit, Google Glass, Nike’s FuelBand and the Samsung Gear gaining traction and popularity, wearables are moving out of the concept stage and into the development and production phases. Once believed to be just some cool novelties from James Bond’s closet of gadgets, wearables may spawn another wave of computing innovation.

But what does this all mean for payments? Apple came out and said that the Apple Watch would be able to do NFC payments. Essentially, the Apple Watch is an extension of your iPhone and can do some of the everyday functions that you would normally go to your phone for. Using Apple Pay will be one of those key functions.

Now, we havent really seen it in action and the Apple Watch won’t be available till early 2015, so we don’t know exactly what the user experience will be like, but we shouldn’t take Apple’s announcement lightly.  Apple isn’t the kind of company that gets into certain categories for the fun of it. They are betting on wearables in a big way – the same way Google is.  To date, the most successful products in the category are health and exercise tools. Apple and Google are betting that exercise is just the beginning.

The ability to authorize a payment with your smartphone is a gateway to payment authorization with other smart devices. The iPhone 6 and Apple Watch combination may be that bridge. And wearables have some traits that make them better payment devices than phones. For one, they are much more difficult to lose. A watch is with you at all times and you seldom remove it when you are out in public. It’s also more difficult to steal for the same reason.

Watches also have better battery life.  We’ve all been there – its 4 o’clock on a Saturday, we’re out and about, using our phones all day. Battery life still isn’t where we all think it should be. The Apple Watch should be able to solve for that as it will have a very powerful battery.

With all that being said, I don’t think wearables will impact payments in the near future and there are major reasons for that. Firstly, The Apple Watch relies on communication with your iPhone to work properly. It doesn’t work independently, so some of those advantages I listed above are kind of mute. If you lose your phone or it dies, your Apple Watch becomes a clunky piece of metal on your wrist.

Secondly (and most importantly), the majority of U.S. consumers still aren’t comfortable tapping a smartcard or a smartphone to authorize payments. Going from plastic to wearables, bypassing phones, seems like a drastic leap. Consumers will need to feel comfortable making transactions with their primary smart device before they ever feel comfortable making them with secondary or auxiliary devices such as smart watches or glasses.

So where does that leave us? Similar to the early adoption phases of most categories and industries, it will take time or that one application or piece of technology that is going to tie it all together. Wearables are already a part of our present and they will be part of our future. But we need to take a step by step approach and see how things play out. The integration of payments and wearable devices will take time and will depend on consumers’ adoption of mobile payments.