by Jörn Leogrande
September 01, 2016

The concept of connected living is giving wearables a new lease of life: as a wallet.

Advancing digitisation goes hand in hand with a boom in wearables, as the significance of the Internet of Things shifts beyond simply interacting with a smartphone touchscreen. Secure identification and new forms of real-time communication are at the core of payment processes using wearables.

Ever more people are now paying “on the go”. This trend can above all be observed at public events: whether at the Eurovision Song Contest in Stockholm or at the Olympic Games in Rio de Janeiro, using wristbands and rings to pay for drinks and snacks has become commonplace. Such technology demonstrates an event’s innovative strength. There is one drawback: the reach in these situations is restricted to the number of attendees. Can wearables now find general appeal among the masses?

In the future, wearables will be used for payments more than ever before

Yes, they can, as wearables are meeting more and more demands placed on them by consumers, and the market’s growth rate is high. According to the latest IHS Technology Market Overview, the number of wearables which can be used for payments will increase from 11.6 million units in 2015 to 135.2 million units in 2020. This will result in the yearly transaction volume increasing from USD 1.9 billion to USD 252 billion.

This shows that in the future, wearables will be used for payments more than ever before. Other functions and areas of application, for example smart clothing and fitness tracking, will gain in importance at the same time, with pharmaceutical companies in particular testing the benefits of these. This will make it easier to get a health check-up than it is to read emails. However, while the value added services in this area have taken a back seat, there is more potential to be explored in connection with the idea of connected living.

Security takes priority – HCE technology provides the perfect solution

What does this mean in concrete terms? In the future, our front doors will unlock automatically if we begin to show symptoms of a heart attack. If our body temperature rises too far, our fridge will automatically pour us a glass of cold water. If we run out of coffee, our espresso machine will order some more. Data security is one of the most heavily discussed topics in connection with the subject of connected living. However, this concern will likely subside as experience of these technologies increases, allowing the benefits of such solutions to come to the fore.

One way in which mobile payment solutions can be offered via wearables is the use of host card emulation (HCE) technology. This software-based solution facilitates secure contactless transactions for payments and services in mobile applications. All data generated during a transaction is no longer stored on a hardware component, but instead transferred to a PCI-secured served environment.

Encrypted card data is saved using cloud-based payment (HCE). HCE relies on the near field communication (NFC) transmission standard, which enables wireless transmission of data over short distances. The wearable device communicates with an NFC-enabled payment terminal. This technology can be implemented in existing wearables by way of a simple payment interface in the form of a software development kit (SDK).

Pay by a flick of the wrist

Making a payment with a simple flick of the wrist was a fanciful idea just a few years ago – but now, it is a reality. The mobile lifestyle is impacting on our everyday lives: people are willing to make payments on the move. Wearables with integrated payment functionality are a reflection of this change. Leading innovators such as Wirecard provide an integration platform which helps retailers to offer the option of contactless payment via wearable.