Industry News

Will wearables open a new door to frictionless mobile payments?


For even many tech-savvy consumers around the world, making payments with a mobile phone remains something of a novelty. Yet at this very moment early-adopters are being tempted with the option of making payments without even having to reach for their phone, using “wearable” electronic devices including watches and eyeglasses.

Last month it was revealed that MasterCard and the Royal Bank of Canada had engaged in a pilot program involving a wristband called Nymi. Built by a Canadian firm called Bionym, the Nymi (pictured above) uses the unique electrocardiogram (ECG) wave, or heart rhythm, of the person wearing it as a form of identification. The device currently sells for US $79, and is designed to let outside developers come up with their own applications for the technology. The company says that such “frictionless authentication” would allow the wearer to more easily easily do things that normally require a PIN or identity card, such a opening a locked door – or making a mobile payment.

“We’re continuing to work to provide customers increased choice [in] how they pay,” explained the head of Royal Bank of Canada’s head of mobile payments unit in announcing the pilot program. “Once their wristband is activated, they can leave their phone at home while they go for a run or run an errand and conveniently and securely buy a coffee or groceries with a tap of the wrist.”

But questions remain about how suitable such a technology is for mobile payments, and how soon it may be before we see people making payments with the wave of a wrist. (Or, in the case of a wearable like Google Glass, with the bat of an eye.)

According to a recent estimate by Juniper Research, 100 million such wearable devices will be sold over the next few years, and that payments using them will be a “key trend” during the period. And indeed, a growing number of payment firms have jumped on the bandwagon, including PayPal, which earlier this year released an app for Samsung’s Galaxy Gear 2 watch, as well as the Pebble smartwatch. As always, people are expecting that the entrance of Apple – in the form of its iOS 8-friendly smartwatch, which is due to be released next spring – will give the technology an instant boost, if not mark a tipping point towards broad consumer acceptance.

“There are numerous possible instances where it may be a lot easier to use your watch as a payment device instead of having to take your phone out of your pocket,” says Zoltán Ács, director of research and development at Cellum, which among other wearable-related initiatives has recently ported its motionQR technology to a Motorola Moto 360. “The advent of the smartwatch could significantly disrupt the mobile payments market, and they will, in one way or another, be tied in with various payment solutions.”

Despite all this, a fair bit of skepticism or caution may be called for when pondering the short-term outlook for wearables and mobile payments.

Aside from what Ács says are questions about the level of security offered by electrocardiogram-based authentication such as Nymi’s, it is unlikely that many consumers will race to adopt wearables unless such devices offer other compelling uses. And the built-in limitations of a wearable like a watch in terms of things like screen size may serve as a major barrier to the creation of such use cases. For example, one write-up of PayPal’s Pebble app scathingly called the user interface “late 1990s UI level ugly.” It is also hard to imagine you will soon be reading stories like this on your smartwatch, compared to the smartphone you and countless others already possess, most of which are already able to make hyper-secure mobile payments at a tap or wave’s notice.