The pace of developments in the digital payments arena accelerated rapidly in 2014, just as expected.  There were a number of memorable announcements, most of them fast and furious in September.  A number centred around new payment services, Apple, mobile phones and smart watches.

Mobile payments are now mainstream

Mobile payments are now in the process of transitioning from the ‘innovation’ and ‘early adopter’ stage to that of ‘early majority’.  Along with other consumers, I am being tempted into replacing my bulky physical wallet, with the wallet and app functions on my phone.  I have already scanned most of my loyalty cards into my CardStar app.  More retailers from coffee and grocery stores to health clubs are equipped to accept tap & go or scan functionality on phones.  I use the NFC enabled VISA card in my banking app to tap payments directly from my phone.  Technology companies such as Samsung and Apple have been steadily luring customers with flashier and faster phones, newer payment technologies and upgraded functionality.

Additionally, financial institutions and retailers of all colours are vying for app real-estate on your smart phone screen.  The prize for them is everything from a simple convenience related up-sell or an opportunity to generate loyalty, to gathering information about your daily habits.  Just as with their websites, most major corporations are rushing to update and upgrade their once rudimentary mobile sites.  Many banks and financial organizations have a proprietary app, often incorporating image capture to deposit checks (cheques).   Additionally, most of a new young generation of users is growing up ‘connected’, tethered as they are to their smart phones.  This is another potential prize – a market of technology savvy teenagers who can be nurtured into hungry consumers over the coming years.

Digital payments – a behavioural shift beyond mobile

Of all the major announcements in 2014, Apple Pay was among the most interesting.  What makes this significant, and what makes it something to ‘watch’ for in 2015?  The answer is mind share, ubiquity and tipping point.

Mobile is no longer an alien concept.  It is about mind share – and the fact that more people are looking for greater convenience.  It started with your morning coffee – being able to tap and go, first with loyalty and pre-paid plastic cards, and now with mobile apps.

10 years ago you would have been laughed at if you posited that over 50% of transactions under $50 would be done by with a simple tap and go.  Yet, a report from the Canadian Bankers Association (CBA) published Oct 2014 stated that “For [Canadian] consumers, the ability to bank online (86 per cent), use the “tap and go” feature on a debit or credit card (61 per cent) and use a mobile device to pay for purchases (59 per cent) add value to their banking.”  I suggest that by the end of this year we will start seeing demand for more contactless payments to be driven off smart watches.

Then there is the ubiquity.  RFID cards and bands are popping up everywhere, making tap and go second nature.  Transportation organizations in most major metropolitan cities have transitioned to tap and go functionality to speed up the daily commute.    London has the Oyster card, but has recently expanded their  ticketing to accept other approved contactless debit and credit cards.  In the GTA Presto card has made for a speedy cashless commute, complete with easy reload.   Most hotel room keys are now RFID enabled.  We are seeing RFID access cards on the ski slopes where it speeds up the ski lift lines.  Pandering to a different market segment, Disney launched their Magic Band in 2013 which uses RFID to reduce wait times at their parks.   The snazzy band which functions as Entry pass, keycard and Fast Pass also incorporates a contactless payment feature.  All this has gradually replaced our mental resistance to contactless with an increased acceptance and expectation of speed and convenience.

The Apple Pay and Apple Watch announcements created a tipping point in potential users for the digital payments market.   Instead of competing on a parallel platform, Apple now brings their immense market to the NFC table.  All the apps, software and hardware that have been built – and sat simmering on the side lines for the past few years – now get exposure beyond their Android user base, as the gigantic iOS market opens up to them.  Retailers no longer have to choose between Android and iOS, and now can upgrade their systems to serve a broader audience.  Apple added a bonus by saying they intend to be a conduit of payments – they will not track your buying habits, they will not divulge your credit card or payment information.  This makes Apple Pay appealing to the audience who wanted the convenience of digital payments, but baulked at involuntarily sharing their private purchasing habits.

Smart watches, smart bands and wearables

The other phenomenon that gathered great momentum last year was wearable technology, in particular, smart bands.

Wearable technology

Digital Dreams smartbands

At first, these were mostly used for fitness purposes.  I noticed a proliferation of Fitbits and Fuelbands as everyone attempted to keep their 2014 New Year resolutions.

Then came the slew of summer musical festivals that cater to a 18-35+ age group.  Across the world events such as Coachella, and in Toronto, Veld and Digital Dreams used RFID ticket wristbands to manage entry and id, and in the latter, even to manage cashless payments and carding for alcohol purchases on site.

I personally got introduced to smart watches in September when a fairy godmother got me a Samsung Gear Fit to complement my Samsung Note 2 – just in time for the Women in Payments conference that I was assisting at.  That is when I realized the amazing lure and advantage of the SmartWatch.

Receiving alerts and call notifications on a Samsung Gear Fit

 With my bulky Samsung Note II conveniently tucked out of sight, I was able to track texts and emails from the speakers as they concurrently readied for their presentations in multiple rooms.  A surreptitious buzz on my pulse would alert me to messages I could nonchalantly read, and even answer, on my wrist.  I was more hooked on this technology as a productivity enabler than as a fitness tool.  Suddenly, I did not have to handbag dive every time a call came in.  As I listened to the speakers discuss the various innovations in the payments industry I realized that all these areas are going to collide, and that smart watches are soon going to be at the forefront of payments.  After all, I may forget my wallet and even my phone, but I rarely leave home without this personal fashion accessory!

Apple Pay with Apple Watch

Apple, of course, also expects just such a progression.  You will notice in their iPhone 6 launch announcement how their Apple Pay announcement segued to an announcement of Apple Watch, and how they will work together.

And just like that, we have transitioned from mobile payments to digital payments …

2015 – the year we ‘watch’ for the smartwatch

Apple Watch will be launching in the US in March 2015 – and hopefully soon after across Canada and other parts of the world.  As the early adopters rush to own and experiment, they will be demanding as much from their watches as they get from their phones:

• Time and date – √
• Alerts – √
• Call notification – √
• Text notification – √
• Camera – √
• Fitness apps – √
• Social apps – √
• GPS, directions & maps – √
• Weather – √
• Tap and Go – √
• Payments – √

Apple Watch already has competition in the Samsung Galaxy Gear S which is already out in production, having been launched in 2014.  With the added advantage that it can have its own SIM card making it independently network connected, Samsung is looking to make a stand in the battle for your wrist real estate.

‘}…{‘

Over to you:

} ..  Do you see yourself as an early adopter?

} ..  Do you see yourself owning a smart watch by the end of 2015?  And when do you expect you will start using it to travel to work or to buy a coffee?  When will you start wearing your wallet?

Inspiration and research material for this blog:

• ‘Reflection’ Photo credit Andrew de Souza, Algonquin, September 2014
• Apple Pay /Apple Watch announcement – The announcement of Apple Pay, was embedded in the September 2014 launch of the iPhone 6/6plus (min 43:00-55:00).With the service already launched in the US, Apple has created partnerships with over 500 US banks.  It is rumoured that Apple Pay will launch in Canada in Spring 2015 – I am guessing with TD whose US branches recently joined the 500 US banks and retailers that already work with Apple Pay.  The Apple Watch announcement (min 56:00 – 1:41:00) and the announcement that Apple Watch would work with Apple Pay (min 1:41:51).
• Samsung Galaxy Gear S
• Digital dreams http://ontario.djmag.ca/blog/2014/03/30/102490/
• http://www.thescenemagazine.ca/best-worst-digital-dreams-2014/
• Intellitix
• http://www.cba.ca/en/media-room/50-backgrounders-on-banking-issues/125-technology-and-banking
• http://nfctimes.com/news/disney-taps-contactless-and-nfc-technology-connect-customers-its-fantasy-world
• http://electronics.howstuffworks.com/difference-between-rfid-and-nfc.htm
  • POS – Point Of Sale
  • NFC – Near Field Communication
  • RFID – Radio Frequency IDentification

Please send a comment if you need clarification on any of the nomenclature used in this post, especially any acronyms.

I look forward to hearing your thoughts on digital payments and smart watches.