Paying with wearables: The next big thing in IoT

What does the future hold for connected devices? For consumers, convenient ways to pay are high on their lists.

By Avin Arumugam, Visa SVP, Internet of Things

There has been an explosion of devices and connectedness in just the last two years—everything from your watch to your car to possibly your coffeemaker has some kind of Internet-connected capability—and no doubt this trend will continue to intensify. Gartner projects that by 2020, 21 billion devices will be linked to the Internet, which opens up nearly as many opportunities for payments ¹.

This growing network of objects that are able to collect and share data via embedded sensors—the Internet of Things (IoT)—looks to make our lives better and more convenient. In fact, a recent study by Visa and PYMNTS.com showed that 70 percent of consumers consistently feel their devices improve their quality of life ². Contributing to that convenience is payment technology.

According to the same survey, more than 60 percent of consumers said they would like to pay for products more efficiently and quickly, with 44 percent preferring to automatically pay without having to manually check out online or physically stop by a counter ¹. Invisible payment experiences, like those of today’s ride shares, are starting to become a consumer expectation rather than a nice-to-have convenience.

Paying with wearables

Do you dream of a world where you can pay for your morning coffee with just a tap? Today's connected devices are beginning to make this dream a reality. Hear from Visa's SVP of Innovation and Strategic Partnerships on how recent launches of new connected devices affect the future of payments.

Payments and the IoT

When we consider how the space is maturing, we predict that IoT will likely follow the same evolutionary path as e commerce, transitioning through three stages. In the first stage, devices become connected, mirroring the early days of users embracing online communication in the late 1990s. Then devices collect and process data, which we can compare to retailers displaying their goods in virtual shops. Finally, similar to the flourishing e-commerce developments on the web, we expect IoT devices to become commerce portals by offering items for sale with secure payments.

Where this path differs from e-commerce, though, is that the IoT signals a move from software to hardware. Because the physical functionality of the device is crucial, we expect to see an influx of engineering and design talent in hardware.

The evolution of wearables

Case in point: the wearables industry. Payment volume via wearables is expected to grow to $501.1 billion, approximately 20 percent of all proximity payments, by 2020 ³. Participants in the Visa and PYMNTS.com study reported that they now own on average more than four connected devices. Take a smartphone, computer, laptop and video game console out of the equation and wearable activity trackers top the list (41 percent of connected consumers own at least one connected device) ².

Similar to the flourishing e-commerce developments on the web, we expect IoT devices to become commerce portals by offering items for sale with secure payments.

Preparing for this shift, Visa has made a number of programs and new payment technologies available over the last several years, empowering partners to offer safe, secure and convenient ways to pay across a range of connected devices. This open and templated approach to facilitating payment solutions has culminated in two major consumer electronics manufacturers, Fitbit and Garmin, launching products that will offer Visa account holders new ways to pay.

Both the Fitbit Ionic and Garmin vívoactive 3 take advantage of the Visa Token Service, an innovative technology that replaces sensitive account information with a unique digital identifier, or “token,” and is designed to make payments with mobile devices more secure.

What’s next?

Tap-and-pay wearables are just the beginning. The Internet of Things will slowly, but surely, become a significant part of people’s lives. As the things we use every day increasingly support connectedness, we believe consumers will become more comfortable with and reliant on IoT (even if they don’t call it that), making it something they will expect over time. Effortless payments, in turn, have the potential to be part of each one of those experiences.

For example, when we look ahead to the rise of self-driving autonomous vehicles, we can see how the car will pivot into a roving lounge, freeing consumers from navigation and operation. Commercial opportunities abound for ushering in this new era in which more opportunities open up for the consumer to engage with brands. In the connected home, seamless retail payment options can help consumers make purchases from various household devices—fewer errands mean greater convenience.

For Visa, IoT presents new meaningful opportunities for collaborations, and traversing some learning curves as we experiment with how to best work with diverse new partners in lifestyle companies and hardware manufacturing. These partnerships will ultimately benefit consumers, endeavoring to bring together an ecosystem that can facilitate secure, seamless payment options from anywhere with any device.

Share this article and your thoughts on the next IoT device that you think will be payment enabled.

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