Rebecca Paredes April 25th, 2016
Three years ago, Target caught a bug before Christmas — and helped make today’s digital wallet surge a reality.
Back in 2013, someone installed malware in Target’s payment system. Over the span of about two weeks, 40 million credit card numbers were captured, stored, and stolen on a hacked server. The Target hack is considered one of the biggest credit card heists in American history.
For months afterward, customers were outraged, scared, and confused. They wondered how something like this could happen on such a massive scale. They worried whether their money was safe, or if it ever would be.
In this fearful climate, a more secure and controlled method of making payments was a necessity — which makes a digital wallet on wearable devices an easy sell.
But is the digital wallet truly here to stay?
How A Digital Wallet Works
A digital wallet is a form of payment that uses encryption software in place of your regular credit or debit card. Smartphones and most wearable devices use near-field communication (NFC) chips to communicate with a point-of-sale (POS) terminal, and your payment is processed in a matter of seconds.
But what does this look like with wearables? Here’s how contactless payment plays out across some of the leaders in the wearable tech industry:
Apple Watch
After adding your credit or debit card to the Wallet app, you walk into the closest Starbucks and order a latte and a bagel. At the register, you realize you’ve forgotten your wallet at home, but that’s okay — you double click the side button on your Apple Watch, swipe over to the appropriate payment card, and hold your screen a few centimeters away from the contactless card reader.
You feel a gentle tap from your Apple Watch and hear a beep, which confirms the payment has gone through. The whole process, from start to finish, takes less than a minute.
Behind the scenes, Apple Pay generated a random, 16-digit number to mimic your actual credit or debit card number. That number is sent to the NFC chip, which is then sent to the POS, and the payment processes as usual. Nothing is stored in Starbucks’ servers, Apple’s servers, or your Apple Watch.
Plus, you get a bagel. Win-win.
Jawbone Up 4
You’re finishing up a run and feel hungrier than a wrestler cutting weight. You decide to pop into your favorite juice bar for an acai bowl. Since you’ve added your American Express card to your Jawbone Up app, you place your order, apologize to the cashier for your post-run stink, and hold your Jawbone Up 4 against the contactless payment terminal.
You hear a beep, see a light, or the cashier tells you the payment went through — and again, the process took less than a minute.
Meanwhile, your card’s information goes through the same encryption process we detailed above with the Apple Watch. The payment information associated with your Jawbone Up 4 receives a separate, unique number, so your card number is never actually transmitted — the only thing that’s transmitted is the spoonful of acai directly into your face.
Samsung Gear S2
The Samsung Gear S2 is equipped with Samsung Pay, which uses the same NFC technology as Apple Watch and Jawbone Up 4. The difference, though, is that if you want to walk into a local coffee shop instead of Starbucks, you might be out of luck with Apple Pay — it’s only accepted at locations with an NFC-enabled terminal, which is fine at most popular chains.
But if you want some locally brewed pour-over at the tiny coffee shop down the street, you can still pay with contactless payment. On a mobile phone, Samsung Pay is equipped with magnetic secure transmission (MST), which can make your phone function like a credit card even at POS terminals that don’t accept NFC.
So, if you don’t see a contactless payment feature for your Gear S2 at checkout, just whip out your mobile phone and hold it a few centimeters away from the terminal — you’ll still get the protection of encrypted data, plus a mug of delicious pour-over coffee.
The Future Of Wearable Devices As Digital Wallets
Apple, Jawbone, and Samsung are leading the charge in the quest to integrate digital wallet technology with popular wearable devices. But there’s another side effect of the recent surge for secure mobile payments: a wider range of technology for different types of consumers.
Take bPay, for instance. It’s a wearable created by Barclays, a bank based in the UK, and it comes in three convenient forms: a sticker, a key fob, and a bracelet. It can be used to pay for anything £30 and under, and the wearable can be linked to most major debit or credit cards.
But the most revolutionary thing about bPay is its price: all models are under £19.99, or $28.98. It’s an affordable solution if you want a wearable form of contactless payment without all the bells and whistles — and the price tag that comes with them.
Eyes On Design
Consider Kerv, the world’s first contactless payment ring. It was literally designed because the founder, Philip Campbell, felt other payment devices were either “eye-wateringly expensive” or “thoroughly unattractive,” which is as good a reason as any to create an innovative product.
In fact, Campbell’s statements reflect a larger push in wearable devices in general — we’ve seen devices like the Jawbone Up 3 move away from looking like a wearable, choosing instead to adopt minimalist details that blend into the user’s wardrobe.
This push toward aesthetics is why Kerv’s “aerospace-grade zirconia technical ceramic” is a legitimate selling point. It’s a wearable, but it’s also a simple ring, which makes it easier to use for contactless payments. You pay for your purchases by pressing the ring against an NFC terminal without ever having to swipe through any windows, press any buttons, or do much of anything, really — it’s a digital wallet that blends into the background, and it does so beautifully.
Digital wallets are a fast and secure way to make payments, and innovative technologies like Kerv and bPay are testaments to the field’s continuing evolution. Wearables may not make us abandon our wallets altogether anytime soon (we still need places to stash all those old receipts) but one thing is clear: thanks to wearable devices, we have one less thing to store in our pockets. In fact, we can pay with just a flick of the wrist.
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