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Consumers have been used to tapping and paying with credit or debit cards for years, removing the need to enter their cards into a supplier’s card reader and type in their PIN.
Typically, such transactions are limited to low amounts of money to prevent serious issues – for the banks in particular – should cards be used for unauthorised transactions, either intentionally or accidentally.
As with any new banking technology, initial take-up was slow due to perceived risks on the part of customers, with some people buying metal wallets or cases to act as Faraday cages to prevent their cards being read by malicious entities.
The actual risk has remained tiny, and tap-and-pay methods are now widespread for low-value purchases. They’re quick and convenient and the level of fraud and misuse has been low.
The logical next step – at least from the banks’ perspective – is to do away with the card altogether for such transactions. From a technical point of view, there’s nothing in a contactless credit or debit card that can’t be replicated in some other device, one that’s more practical and convenient to use.
The easier it is to make payments, the more people are likely to use this type of payment method, which equates to greater business success for the bank and also faster throughput for stores in which such payment is accepted.
It takes much longer for someone to remove their card from their wallet or purse than to simply wave their hand over a payment reader, so quicker payment is good for the customer and for the store or organisation concerned.
Two banks in Sweden have recently taken such a step by giving their customers the option to use wearable technology to make low-value payments. If tap-and-pay by card is faster than Chip and PIN, a tap-and-pay watch or other item of apparel should be even faster.
The two banks concerned are Swedbank and Nordea, the latter being the largest bank in the Nordic region. Both are using Fidesmo Pay for their new methods of payment. Fidesmo specialises in contactless services in cards or wearables.
Both Swedbank and Nordea are giving their customers with a Mastercard debit card the option of “tokenising” the card and adding it to the wearable device. This means that any contactless transaction made with the wearable device is debited from their Mastercard account, so the wearable doesn’t require a new account but is simply a different way of accessing an existing one.
Mattias Eld, CEO at Fidesmo, said: “By this collaboration, a large part of private customers with Mastercard debit cards on the Swedish market will now gain access to use Fidesmo.”
Meanwhile Erik Zingmark, head of transaction banking at Nordea, said: “We strive to always provide our customers in Nordea with the freedom to choose their preferred digital solution. We are therefore very pleased to have this collaboration with Fidesmo as their product provides a convenient payment solution and makes banking easier for our customers.”
If you’re thinking that customers may baulk at replacing a perfectly good watch with one that they can use to make contactless payments, Fidesmo has already thought of that, as watch straps can be equipped with the new technology – so there’s no need to get rid of the existing Rolex, Tag Heuer, Swatch, Timex, Casio, or Apple Watch to take advantage of the new payment paradigm.
Instead, a Swedbank or Nordea customer can just replace its strap with a new one from Nordic fashion brands such as TRIWA, and then make purchases while retaining the ability to tell the time and/or look stylish. If customers do want a completely new watch, the Fidesmo Pay payment technology is built into analogue watches available from Ur & Penn and BERG.
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Other items that are likely to be added to the payment wearables list in the future are jewellery and various types of clothing.
Contactless services aren’t limited to banking. The Fidesmo tech can also be used in other scenarios where contactless devices might be used. This includes public transport tickets, office access keys, hotel room keys and loyalty schemes.
Potentially, this means that several different features can be incorporated into the same device, so customers could use the same card or wearable device to access their office door system and pay for their morning coffee and newspaper. That alone is likely to be a big selling point for many people, since carrying countless different cards, fobs and lanyards around can be time-consuming and annoying.
To date, wearable technology hasn’t taken off as quickly as some analysts expected it might. The majority of solutions have been based on watches, as is the case with the two Swedish banks.
There’s no real reason why that can’t be expanded to other objects, since solutions such as Fidesmo Pay require no batteries on the device itself, being powered by an induced current generated by the reader – just as is the case for office door keys and hotel keys.
Banking and payment in particular is the perfect target market for wearables because it can increase security – through biometric information collection – while also giving banks more data about customers and their habits.
So although it may seem a relatively small step to tokenise a debit card and add it to a watch strap, this is likely to be just the start of increasingly diverse and innovative payment solutions. Some will succeed, some will fail, but the likely outcome is that payment can be made with the simplest of gestures, requiring little to no action on the part of the customer.