Wearable technology is shifting our behaviour – even how we pay

And wearable technology - like fitness watches and smart devices - is not only changing our daily behaviours, it is shaping how we make daily payments.
 

It’s estimated that in 2020/21, there will be over 500 million wearable devices in the global market. The increase in wearable technology is opening up these devices to the extent that in addition to tracking fitness data, giving us access to our office and home spaces, wearable devices will also store the necessary technology for transacting payments.

Rufaida Ismail, Head of Payments, Investec Private Banking in SA, explains, “As more wearables come onto the market, there are more options for frictionless payments. We’ve seen a shift away from cash, with fewer ATM withdrawals and in some cases some erosion of traditional electronic transactions - this is the next step in the evolution.”

Wearables are the future
 

The introduction of wearable devices such as Garmins and Fitbits that house digital tech means that on-the-go wearers can transact with the tap of their watch or even their phone, with apps like Garmin, Fitbit or Samsung Pay. Ilze Wagener, of Investec Private Banking in SA’s Product Optimisation and Development team explains, “A wearable can be a device or apparel in which personal information can be embedded and it's something that you always have with you. The same security features that you’d have for your phone or your computer, such as a passcode, are built into the application. You open your watch with the passcode, and then you can make a quick and frictionless payment.”

These are the wearable payment options available right now in South Africa, but with tokenisation, the potential for growth is exponential. Tokenisation is a process that allocates a random number to a transaction rather than passing on the real credit card number itself. “Tokenisation is the highway that’s now opened up opportunities for tech companies and their payment solutions,” says Ilze.

“We’ll see a number of brands coming online in the near future and this will increase the wearable market exponentially and change user behaviour fundamentally.”

Staying one step ahead

For early adopters of the technology, there’s the prestige of the high tech ‘wow’ factor but ultimately, wearable payment options are more about convenience. “Fast, seamless transactions are your daily touch point with banks – at Investec, we want that to be as effortless as possible,” says Rufaida. “As global citizens, the majority of our clients are more likely to be tech-savvy and looking for options that move towards seamless payments. Contactless payments have a greater sense of immediacy for the busy, fast-paced lifestyle.”

However, there is a need to build in capacity as more of these wearable options come online. “It’s a chicken and egg situation,” says Ilze. “The prevalence of these payment options will require updated merchant point of sales and an increase in the wearable market will be in tandem with merchant hardware upgrades. But some devices, like Samsung Pay, can be used on points that aren’t contactless.”

“There is a challenge in being one step ahead of the market and introducing new devices which enable payments, and we have found that working together with merchants can ease the transition,” says Rufaida. “We have to meet user demand while allaying security concerns. The success of these payments depend fundamentally on the number of merchants and point of sale devices that are enabled to process these transactions. 
 

“However, tokenisation means that transactions are even safer than traditional credit card transactions. In the future, a traditional plastic card becomes one of many options instead of the only option for transacting.”