Watch out, there’s an Apple about…
You may have already guessed what the topic of this weeks editorial is, so let’s just get it out of the way so we can swiftly move on to something that will have a more immediate impact on our lives and on the industry. I am, of course, talking about the release of the Apple Watch; the product that (supposedly) is heralding in the age of wearables. Just as long as you ignore those companies that already had similar product out there in the marketplace.
Certainly, riding high on the growing momentum for increasing acceptance of contactless payments, the idea of another form factor that could enhance the consumer experience is one that many payment technology companies are not going to ignore. Apple Pay is expected to be an important convenience feature of the new Apple Watch, facilitating ease for in-store payments without a credit card. US mobile proximity payments - which include payments made with a smartphone at the point of sale in place of a credit card or cash - totalled $3.5 billion in 2014, according to eMarketer. That figure will increase significantly to reach $27.5 billion by 2016, and $118 billion by 2018. There were 15.9 million US mobile proximity payments users in the US in 2014, according to eMarketer. By 2016, that figure will more than double to reach 36.2 billion.
How Apple Watch owners will be able to use their device to make payments, unlock hotel rooms and the garage doors at their home was demonstrated by Kevin Lynch, Apple’s VP of Technology, at the company’s Spring Forward launch event. “If you go to lunch and want to pick up dinner on the way home, you might go to Whole Foods,” he explained. “You can use Apple Watch to actually pay for things while you’re checking out. I’ve got my credit cards right inside my watch. To bring one up, all I have to do is double tap the side button and it brings up my credit card and then I just put my watch near the merchant’s terminal and I’ve paid, that’s it, I’m done. It’s super simple to pay with Apple Watch.” Lynch also showed attendees how Apple Pay works at a store, using a handheld merchant terminal. “It’s a lot of fun to use and you don’t have to bring the watch face and touch the merchant terminal; as soon as you get to it, you’ll hear the audible noise that you hear and you also have feedback on your wrist so you know the transaction was done. It’s super easy to do.”
It's super easy to say, too, but reality may be a little more complicated. “Smartphones already offer a convenient way to check the time, access the web and apps, and increasingly pay for products," said Cathy Boyle, senior mobile analyst at eMarketer. "So, to succeed with a smart watch, Apple needs to create a compelling use case for the device, a feature set that offers far more than simply saving consumers the few seconds it takes to pull a smartphone out of a pocket or purse. Enthusiasm for smart watches has been relatively low, suggesting the wearable tech sector needs a 'magic' product to spark adoption. Apple Watch is best positioned to be that product, given the device's close association with the iPhone and the size of the iPhone user base-one in four US consumers regularly uses an iPhone."
iPhone users will account for 43.3% of all US smartphone users in 2015, according to eMarketer, up from 42.3% last year. By comparison, Android users accounted for 51.7% in 2015, up from 51.3% the previous year. The adoption of another form factor for payment enablement on based on the kind of figures is one that cannot be ignored. Looking more closely into the UK, iPhone users accounted for 30.8% of smartphone users in 2014, eMarketer estimates, and will increase share to 32.2% this year. Meanwhile, Android users represented 55.9% of all smartphone users in the UK in 2014, and will also increase share this year to 56.2%. Is it any wonder that so many companies are seeing potential in this introduction and take-up of the product?
The watch promises to open up further contactless technology introduction into the mainstream through associative applications and uses. “Now when I arrive at my hotel room, I also get a notification when I get near hotels like SPG’s W Hotel,” Apple’s Lynch demonstrated, showing attendees his reservation information for the New York hotel on his Apple Watch. “You can see it’s got all the information I need to check-in, my confirmation number, my room number. You can see these are really rich notifications; they have images, they have great typography and rich layout and it not only looks great and reflects the brand and the company, but it also makes it easier for you to understand very quickly and you can act on these. In this case I can use this to unlock my door right from the notification from my watch. So I press ‘unlock your door’, I can bypass the front desk entirely, go to my room and then my watch is my room key. I just wave it in front of the door and I go into my room.”
Examples like this may take a little time to bear fruit but many companies are seeing more immediate possibilities within a retail environment. Especially since the idea of beacons captured the imagination of proximity marketeers. “Retailers and brands should take note of the opportunities that Apple Watch will offer them. The device provides an immediate connection to consumers and will enhance their digital experience in-store. The likelihood of responding to a beacon-pushed message delivered to your watch is also perhaps a lot greater than taking your phone out of a pocket or bag, unlocking it and clicking on the alert in the notification area. Once in-store, whether used for getting information on a product, checking in, paying, registering a loyalty card, or receiving offers, the options available will give brands and retailers a number of different engagement touch points to help drive sales,” said Jon Worley, CEO of Marketing, Proxama. “As we have seen with the US launch of Apple Pay, the inclusion of the payment scheme within the watch will no doubt continue to drive contactless payments over the next 12 months. Consumers will soon realise the added convenience to mobile contactless and wearable transactions, paying with a simple, single touch of a device which is already in their hand or on their wrist.”
Even though the news was focused on the Apple Watch last week, other watch companies have also put a stake in the ground. Swiss watch company Swatch also wants in on the market, albeit on their terms. They have admitted that they like the idea of using their Swatch watches for payment applications but have played down the possibility of a one-to-one face off with the Apple Watch. "We don't want to produce a mini mobile phone on your wrist," Swatch Chief Executive Nick Hayek said while discussing the company's financial results. "Others can do that. Samsung did it, Sony did it. Everybody does it. We are not a consumer electronics company.”
Nevertheless the Apple Watch is likely to sell at least 10 million and possibly as many as 20 million units this year, Forbes says. This "reveals anew the company's unsurpassed ability to gain interest for a product that people don't really know what to do with yet". Agreed, but I bet there are plenty of companies in our industry sector that are already trying to figure out how to make the best out of the new ‘payment devices’ people may soon have strapped to their wrists.
Until next week,
Steve Atkins
Contactless Intelligence
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