Computers and artificial intelligence have come along at an exponential rate over the past few decades, from being regarded as oversized adding machines to the point where they have played integral roles in some legitimately creative endeavours.
Last week, at the Wearable World Congress in San Francisco, executives from Capital One, MasterCard and PayPal participated in an animated discussion about the future of mobile payments and explained why wearable technology is an important part of their companies' game plans.
Speaking from a shadowy stage in the city's Palace of Fine Arts Theatre, just spitting distance from the Golden Gate Bridge and the Pacific Ocean, Stephane Wyper, MasterCard's vice president of startup engagement and acceleration, said MasterCard's is focused on leveraging the latest and greatest gadgets, including wearables, to create loyal customers.
"As we look at the future, consumers are clearly interacting with a whole host of new devices that extend beyond plastic or the devices in their pocket," Wyper said. The question for MasterCard is, "How do we enable all of those connected devices to be payment devices?"
Wearables improve, enhance mobile payment experience
The number of wearables in the market is proliferating, and Capital One thinks it can use them to draw and retain customers. Angie Moody, Capital One's vice president of new product innovation, says her company is looking to wearables to "reinvent the way consumers interact with money on a daily business."
Capital One wants to extend the payment experience to help its customer make more informed, responsible payment decisions, by using data collected by wearables, including location and behavioral information. Wearable technology presents a unique opportunity because of the types of data it collects, according to Moody. "Wearables offer new ways to learn who you are, when you are and where you are."
PayPal's Varun Krishna, senior director of its consumer wallet division, sees wearable computing as a significant opportunity for the company that will eventually "give rise to more connected, more personal experiences."
"Wearables provide connectivity at a point that mobile apps can't," Krishna says. "By nature, they're more connected to the user than a phone can be."
However, Krishna stressed that the mass adoption of wearables for mobile payments will hinge on the size of the "acceptance network," or the number of retailers and destinations that support a wide variety of digital payment options. PayPal is aggressively trying to develop and expand that acceptance network, according to Krishna.
Big data, analytics key to success of wearables for mobile payments
Advances in data analytics will also play a crucial role in the evolution of wearable-based, or wearable-assisted, mobile payments, because they'll help finance companies put consumer data to better use. "The amount of data that we have about how consumers spend money is astronomical compared to how we're actually using it," Krishna says.
"Data analytics will be huge," Wyper says, because it will let payments companies "take all the information that's collected and turn it into useable insights. The future [of mobile payments] might be predictive based on context, so if you always use the same service in a location, it might be able to predict which to use when."
For example, if you frequently work in Manhattan, and you always use your corporate credit card while in New York City, it could be automatically served up a payment option on your smartwatch when you arrive at your favorite bar or dining spot, based on your location and past behavior.
Today, payment companies mostly request data about customers, and they then enter as much (or as little) information as they're willing to share into mobile apps or websites. In the future, wearables and other devices will automatically collect data (after users opt in) and deliver relevant, contextual information. It will be "less of a pull and more of a push," Moody says.
Challenges for wearables in mobile payments
Wearables can improve and extend the payment process, but there's also a balance between ease of use, or "friction removal," and the need to provide all information necessary to make informed financial decisions, Moody says.
"You have to balance reduction of friction with the need to make people understand the process," Moody says. "People today spend money without even thinking about it. By removing friction, you take the customer away from the tangibility of cash."
Moody cites Uber's recent decision to make its customers confirm that they're willing to pay for "surge pricing" before they can request a driver. That additional confirmation was added because Uber had "removed too much friction," making it too simple for people to request a ride during peak hours and then get stuck with huge fares, according to Moody.
A balance between ease of use and providing the pertinent information protects consumers and helps build trust between service providers and their customers. "If you break that trust, it's really hard to get it back," Moody says.
Future of wearables and mobile payments
The panelists agreed that there won't be a one-size-fits-all approach to mobile payments or mobile wallets. Just as people carry multiple credit, loyalty and membership cards today, they'll likely use more than one mobile wallet or payment option, on multiple devices, in the future. "It's hard to say there will be one solution that solves all [the challenges]," Wyper says, and a number of different apps and services will provide built-in payment options.
Beyond payments, data collection and predictive analytics, wearables will also play a key role in the future of customer loyalty and ticketing, according to Wyper.
The application ecosystem for both wearables and mobile payments is relatively immature today, and providers will learn from their early mistakes. As they do, the user experience and overall value of the offerings will skyrocket. "I get most excited about this space becoming 'sexy,' developers wanting a piece, [because that] breaks down the 'walled garden' and brings more innovation," Moody says.
Capital One is also actively trying to establish itself as a player in the mobile payment space by offering promotions and discounts in popular mobile apps,including Uber.
"We're just starting to learn," Moody says. "You don't see the gaps until they're in market."
"Today there are lots of disparate pieces ... A lot of the small pieces will come together" in the not-too-distant future to create something highly contextual and relevant, according to Krishna. "