Tap your ring or watch to pay! Wearable payment devices are a reality, but challenges remain

• Wearable payment is a way to make contactless payments using a device you wear, like a smartwatch, fitness tracker, ring, or a wristband
• Wearable payment adoption is hindered by challenges like limited contactless infrastructure, bank charges for device issuance, and managing user experience
• Wearable payments market could see higher adoption once the existing wearable devices can be easily extended to support payments by all major banks

Technology has transformed every aspect of our lives, and payments are no different. From debit and credit cards, to UPI, how we make payments have evolved rapidly over the years. UPI payments happen through our phones, but the next big thing in payment is payment through wearables.

“Wearable payment refers to a contactless payment method made through wearable devices that support the near field communication (NFC) method” says Atish Shelar, COO of Tech Fini, a fintech company. These wearables act as a digital wallet, storing your credit card or bank account information securely.

IndusInd Bank has introduced 'Indus PayWear’ where one can make payments with wearables such as rings and watch clasps, secured via card tokenization tech. Priced between ₹499 and ₹2,999, they offer an alternative to traditional cards and payment apps. Initially this is exclusive to Mastercard.

“Recently introduced contactless payment wearables are slowly gaining popularity among consumers. Integrating tokenization with wearable payments would be like tokenising physical cards that replace actual card details with unique 'tokens’. This initiative will boost consumer confidence,” says Rahul Jain,CFO, NTT DATA Payment Services India.

How RBI made had made wearable payments possible

We need to go back to understand how wearable payments have been made possible.

“A few years ago RBI asked every point of sales (POS) machine to accept contactless payments. RBI pushing it as a mandatory thing has led everyone to adopt on the POS machine side, which in turn gives the chance to bring this facility that to customers,” says Sai Prasanth, Co-founder and CEO, Muse Wearables, which designs payment-enabled hybrid smartwatches.

“Most of the wearable payments options in India are based on card form factor and to make these card based wearable payments more safe and secure, RBI had extended the scope for card tokenization to include wearables (smart watches, bands, etc.) back in 2021 and also increased the limit for contactless transactions( from ₹2,000 to ₹5,000) to boost adoption,” says says Jitin Sehgal, Partner, Consulting, Deloitte India.

In addition, we have also witnessed initiatives from NPCI in this space, such as launch of “OTG Ring for NCMC”, and “RuPay On-the-Go”.

Wearable payment market in India in the nascent stages

The wearable payments market in India appears to be in nascent stages from customer adoption standpoint, even though a number of domestic companies are gaining market share in wearable device manufacturing.

In 2020, SBI and Titan launched a range of watches with contactless payment functions. Axis Bank also launched its own range of wearable contactless devices in 2021.

“We have seen launch of wearable payments options such as rings, watch claps, mobile stickers, by both public and private sector banks, however adoption seems to relatively slow,” says Sehgal.

Several challenges remain

“Some of the key reasons for slow adoption have been limitation on extending existing wearables such as smart watches to support payments, limitation on contactless acceptance infrastructure, wearable device issuance charges from banks, managing customer experience on the device for entering PIN for transactions above the value threshold,” says Sehgal.

NFC technology may not be universally accepted at all payment terminals, and consumers may not be aware of the availability or functionality of these devices. “Consumers may also prefer established payment methods, which requires clear benefits and incentives. Security features and consumer education are essential to address these concerns,” says Shelar.

Also, there is a lot of dependencies that need to be worked on with all financial partners before seamless wearable payments system can be introduced.

The road ahead

Until recently most of the tap and pay systems were available through passive tokenisation methodology where the card details were directly put into a wearable device before the shipment or before it was sold to the customers. People have to keep on topping up their cards.

“With active tokenization, you can have any number of cards and transfer the information to a wearable on a real time basis and your debit or credit card is directly linked to your wearable,” says Prashant.

Now, since there is a limit on contactless transactions, customers would need to carry their card anyway to make payments of over ₹5,000. Once this limit is relaxed, wearable payments are likely to pick up.

There is already an ecosystem of wearable devices in India from domestic and global brands for instance for smart watches. “We believe the wearable payments market could see higher adoption once the existing wearable devices can be easily extended to support payments by all the major banks, as not many customers will not prefer buying a separate device for payments, just on the back of convenience it may offer,” says Sehgal.