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FINANCIAL TECHNOLOGY | Staff Reporter, Singapore
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400 million wearables could be converted for smart payments push by 2022

Mastercard and Tappy are using token technology to allow payments using accessories.

Paying with a watch can soon be a thing of the future thanks to a partnership between Mastercard and token service provider Tappy.

“Every wearable device is a commerce device,'' said Mastercard SVP for Digital Payments and Labs Ben Gilbey in a media presentation during the Singapore Fintech Festival and Singapore Week of Innovation and Technology (SFF x SWITCH) 2019. “By 2022, we see this market expanding to 400 million wearable devices, and that’s just in the smartband and wristwatch space.”

“I think we’re just at the tip of the iceberg in what’s actually possible. Today we’ve seen not just watches, but we’ve seen sunglasses, we’ve seen jewellery.”

One billion analogs and 450 million classic and designer watches are sold every year, he added, with growing adoption in China and Southeast Asia. Companies like Timex Group are already interested in adding payment chips into their watches, according to Tappy CEO Wayne Leung.

Turning watches into portable paying devices
Tappy is looking to embed bendable chips into watch straps using its own Universal Passive Provisioning Unit (UPPU) technology. The partnership enables Tappy to integrate the platform with Mastercard’s Digital Enablement Service (MDES) to tokenise payment credentials at any merchant that accepts Mastercard contactless payments.

The company is looking to launch the device by the first half of 2020 in the Asia Pacific region with wide contactless reach.

Leung ventured into the payment wearables scene after noticing that typical smart watches like Fitbit and Apple Watch either weren’t focused on payments or did not highlight this feature.

“We want to make sure people focus on the payment aspect, how important it is for everyday use and have all other features that will probably be used in a smartwatch, take that aside and put it into a traditional watch people would actually wear every day,” said Leung.

Brands are looking to differentiate their products in the market, something to keep them ahead of the curve, said Tappy VP for Business Development Suboor Ahmed. But they also do not want to compromise the aesthetics of their products. “If we can provide them innovation and maintain the design features of the watch, this is exactly what they are looking for: it provides convenience and brings added value to the brand.”

Instead of targeting a new audience, they are zeroing in on existing patrons who may want to try out the specific payment feature, Leung said.

Regulations and security
Responding to a question about the possibility of the watches being tagged as “financial products” by regulators, Leung said that the devices will only be sold and distributed within their specific region. Adding to that, Mastercard lead for Engage Vijin Venugopalan explained that they are seeking to have their framework “blanket-approved”.

“Instead of having to go to a regulator for every single brand that we are enabling, what you’re looking at is typically like a blanket approval from the regulator.”

Mastercard is also looking into setting common guidelines across its target markets as well as stringent security and certification requirements, Venugopalan said.

Tokenisation will ensure that a customer’s bank details will not be stored across any of the devices, stated Venugopalan, if ever the watch is stolen. “For example, if someone were to renew that token from your watch, and they try to use it for e-commerce, that’s not applicable. That’s the initial enhancement or the additional security benefit of using tokenisation across digital devices.

A token-disabling feature will also be included.

Incentives for adoption
Gilbey stated that Mastercard would leave it up to their bank partners to offer customers incentives for adopting the technology.

“With regards to the ecosystem and the development of digital payments, often we see these incentives as sustainable in the long run. These companies do tend to pay through cash quite quickly by offering stimulus to get consumers to utilize them, so it’s not a long-term sustainable approach.”

Brand association and advertising can also promote the product further to customers. Mastercard and Tappy also assured that transactions will be consistent across tokenised devices, with the former spearheading the scaling of the devices. 

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