Swatch’s next move toward joining the wearable payments market just got a big backer to help the plan move forward.
A Reuters report, citing an unnamed newspaper, indicates that Swatch’s CEO Nick Hayek said the company signed a contract with Visa in relation to its smartwatch that’s going to be equipped with payments technology. The watch exists in the Chinese market through a deal with China UnionPay, and is planned to roll out in Switzerland in 2016.
Hayek confirmed in the report that the Visa deal would ensure a partnership for its Switzerland market but the U.S. Swatch is also expected to announce the deal soon.
The best selling point for Swatch is that this NFC payments-enabled smartwatch doesn’t cost nearly as much as any smartwatch on the market. At a retail price of 580 yuan (about $91), that’s hundreds below what both Samsung and Apple offer in the wearable payments market.
Plus, it looks like a regular watch.
But the race to win over Chinese consumers with wearable payments devices isn’t limited to Swatch, Apple and Samsung. Alibaba is also reportedly creating deals with watchmakers to make it so Alipay can get its share of the smartwatch payments market, too. Swatch may also launch two types of wearables, one specifically with NFC ability that would be compatible with both Android and Windows phones.
“It is important for Swatch to have its own version of the ‘smartwatch,’ as Apple and other technology companies seek to build beachheads on the left wrist,” Luca Solca, an analyst at Exane BNP Paribas, told Bloomberg last month when news about Swatch’s China launch broke. “This is one game for Swatch in a match which is clearly not over.”
While Swatch hasn’t specifically released a commercial pitching its smartwatch in the U.S., there’s been plenty of pitches explaining the upcoming Swatch Touch Zero One Smartwatch.
But, there are plenty of other wearable pay players that have yet to make a dent in the market. Barclays has bPay, which has been relatively quiet in the headlines since it launched in July. And then there’s American Express and its Jawbone deal, which hasn’t quite made its way into the market, but has a NFC payments band in the mix, too. And, of course, the Apple Watch, which hasn’t taken off as expected either.
So what motivates a company like Swatch to be part of the mobile payment race? Perhaps it’s the ability to fill a market niche with a cheaper option that still acts as a functional watch.
Reports in 2015 had pegged it as the year that “wearables really take off.” But that’s what’s been being said for the last decade about mobile payments and they have yet to do so, despite the many players in the market.
One forecast from Tractica estimates that the wearables market will grow to 187.2 million units by 2020, resulting in a 34-percent growth rate for wearable devices over the 17 million units sold in 2013. Smartwatches, they predict, will outpace fitness trackers during the same five-year time period studied.
Another way Swatch may stand out in the wearable payments market is how it protects consumer data. In a news briefing about the launch last month, Hayek noted: “We don’t want to connect to a cloud,” which is notably different than Apple’s devices. Instead, Hayek said the company wants to avoid its smartwatches being reliant on the Internet for payments security, and it doesn’t want to have to rely on electricity to keep those watches ticking.
That means no Wi-Fi, no Bluetooth and no Internet. And it could be protecting consumer data better.
Sounds like Swatch’s foray into the wearable payments market is making their watch a little dumber, but still having one key component that will draw mobile-loving consumers to pick one up: wearable payments.
Are less bells and whistles the key to breaking into the wearable payments market? The U.S. will get to find out soon after it launches in China.