Wearables offer a different kind of mobile payment

| by Will Hernandez
Wearables offer a different kind of mobile payment

At some point this summer, research firm Yankee Group predicts, there will be more mobile lines than people on Earth. That prediction is not limited to mobile phones and includes tablets, connected cars and any other device capable of two-way communication with consumers.

Wearable technology has the potential to account for a sizable portion of those connected devices.

While ExxonMobil's Speedpass-enabled contactless Timex was ahead of its time when it launched in the late 1990s, the watch gave consumers a glimpse of what commerce could involve in the future. Wearable technology development, however, came to a standstill, and only in the last six years has the industry reignited its efforts to make watches, glasses frames and even rings an integral part of commerce and two-way communications.

"Everything is becoming connected, and I think we're inevitably going to get to a point where all these devices can perform some sort of commerce application one way or another," Jordan McKee, an analyst for Yankee Group, told Mobile Payments Today.

The smartwatch

Pebble Technology is one company pushing wearable technology forward with its Pebble smartwatch. The company in February launched an app store for the Pebble, and it did not take long for payment- and financial services-enabled apps to make an appearance.

Wallaby Financial Inc. last month introduced an app that enables users to access their Wallaby Wallet to determine which payment card is best to use in certain situations. The Pasadena, Calif.-based company developed the app because its users were interested in how wearables can simplify apps usually reserved for smartphones.

"What we've done so far is just barely scratching the surface," Wallaby CEO Matthew Goldman told Mobile Payments Today in an interview. "But we want to have familiarity [with these devices] and the ability to talk to our users about how they are using wearables."

Wallaby learned from its customers that mobiles apps involve too many steps to access simple information such as card balances, Goldman said. A user must take the phone out of his or her pocket, enter a code to unlock the phone, find the app, open it and then scroll to the information they wish to view. Smartwatches allow for a leaner process to access data.

Wallaby's Pebble app is barebones compared with the smartphone app, but it works for the smartwatch environment.

"On a watch, you always have it on your wrist, and because of the screen's simplicity, there is a different expectation about what they should see," Goldman said. "It allows you to focus on the critical pieces of information. That also means there will be fewer steps."

Startup BeautifulLab joined Wallaby in Pebble's app store and created the first payment app for the smartwatch using a software development kit from mobile-payment provider LevelUp.

BeautifulLab managed to create a Pebble app that mimics LevelUp's QR code payment experience on the smartphone. The startup's biggest challenge was to develop a consistent QR code LevelUp's readers could accurately scan on Pebble's small screen.

"[The LevelUp] QR code was built for a phone originally," Matt Kiernan, LevelUp's marketing director, told Mobile Payments Today. "It actually didn't take [BeautifulLab] all that long [to get the QR code right], but it did require them to do a little prototype testing."

Goldman and Kiernan believe watches will gain the most traction with consumers, but engineers in the Boston area are putting their own twist on wearable technology.


Last year, two students from the Massachusetts Institute of Technology created a ring embedded with an RFID chip commuters can use to pay their fare on the Boston area's bus and subway system. The students formed a company named Ring Theory and raised almost $20,000 last year through a Kickstarter fundraising campaign.

The Massachusetts Bay Transportation Authority, which operates the Boston area's transit system, blessed the project and gave Ring Theory permission to embed the same chip used for the contactless CharlieCard in the ring.

Ben Jackson, senior analyst for Mercator Advisory Group's prepaid service, owns one of Ring Theory's creations and told Mobile Payments Today his experience with it has been smooth.

"The only thing that has come up is that you kind of have to center it [on the contactless reader], but once you realize that, it's simple," Jackson said.

His biggest fear was that the MBTA's bus drivers would give him a hard time using the ring, but none have so far.

Jackson admitted the ring will not win any fashion awards and is a bit clunky, but he easily wore a winter glove over it and was still able to reload his account at an MBTA ticket kiosk.

"The size may be necessary to make the antennae work," Jackson said. "It's a cool novelty, and we'll have to see how much traction it gets."


The same can be said for other wearables as consumers will determine which products reach mainstream status. Consumers will have plenty to choose from this year as more companies push the technology.

Walt Disney Parks and Resorts' MagicBand is arguably the most ambitious wearable project. MagicBand is a contactless wristband Disney created for its park and hotel patrons to use as a room key, theme park ticket and payment account, Jackson wrote in his report "The Future Is Not in the Cards: Will 'Wearable Payments' Replace Wallets?"

Disney faced delays rolling out MagicBand, but Jackson believes the Magic Kingdom's new attraction can become a leader in wearable payments in much the same way Starbucks has become a leader in mobile payments.

"The two companies share similar advantages," Jackson wrote in the report. "They control their payments environment. They have a large number of customers making multiple transactions in a short time frame. Additionally, they are pairing the payments function with other benefits that provide sufficient value for customers to change their tender types."

Wearables for fitness enthusiasts also could help raise the technology's profile.

Fitbit, Jawbone and Nike Fuelband are devices that track a user's physical activity level. While these devices lack a payments element at the moment, there is a precedent for it to be added in the future.

VITAband at one point had a contactless payment feature but the issuer (Bancorp Bank) responsible for that function decided to no longer support it. Users thought the product was ahead of its time because contactless payments were not widespread, Jackson wrote in his report.

"People have not yet realized the value of contactless payments except in the transit area," Jackson told Mobile Payments Today.

Pebble has a competitor in the smartwatch market with Samsung's Galaxy Gear, but that effort fell a little flat in its debut last year. Samsung launches the Galaxy Gear 2 this month and PayPal has developed an app for it.

Where this technology is headed is anyone's guess, but payments companies that want to play in this space have to have all their bases covered going forward as it relates to new hardware.

"As a technology company, you always have to experiment with the latest," Wallaby's Goldman said. "Sometimes that results in something you release, like with Pebble, and sometimes that results in something you put on the shelf for a while."

Wallaby and LevelUp both developed separate apps for Google Glass, which is not widely available and remains in the realm of tech geeks and early adopters. "Once Google Glass starts to look like normal glasses, then I can see that becoming a likely thing," Kiernan said.

LevelUp's engineers developed a Google Glass app as a project, but it was not released to users. The app is meant for merchants to scan a QR code, Kiernan said.

Consumer adoption, like anything else, will also play a role in how wearables fare going forward. Consumers these days seem more willing to try different gadgets to see what works best for them. It's inevitable that those devices could make commerce as easy as checking your wrist for the time.

"As more devices become connected to the grid if you will, it only makes sense for commerce to migrate to those devices with our society becoming increasingly connected," Yankee Group's McKee said.

Photo courtesy of K?rlis Dambr?ns.

Topics: Contactless / NFC, Handsets / Devices, Mobile/Digital Wallet, POS, Security

Companies: Samsung Electronics America, LevelUp, PayPal, Starbucks

Will Hernandez
Will Hernandez has 14 years of experience ranging from newspapers to wire services and trade publications. Before becoming Editor of MobilePaymentsToday.com, he spent two years as the content manager for PaymentsJournal.com, a leading payments industry news aggregator and information hub published by Mercator Advisory Group. Will spent four years covering the payments industry as an associate editor for multiple publications in SourceMedia's Payments Group based in Chicago. View Will Hernandez's profile on LinkedIn

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