The IoT promises revenue opportunities for payments providers and manufacturers because of the increasing number of connected devices coming to market. However, smartwatch shipments declined in Q2, causing leading smartwatch manufacturers to postpone product launches before the holiday season.
Declining global smartwatch shipments have prompted certain vendors to postpone product launches. Huawei, LE and Lenovo have all decided not to launch a smartwatch this holiday season. Shipments of smartwatches for Q2 were down 55 percent, according to IDC. Initial shipment numbers had signaled huge demand for smartwatches.
According to CNET, consumers are not convinced that smartwatches are a must-have item or that they offer anything over and above a smartphone and existing apps. The products are popular currently because of their health and fitness features, but smartphone apps and dedicated fitness trackers already provide these functions.
Another factor contributing to the decline in smartwatch shipments is that most models must be connected to a smartphone to function because their designs do not allow room for a processor powerful enough to run the necessary apps. Smartwatches are also not trendy; the space required for batteries, sensors and processors makes them bulky and unattractive.
Apple and Samsung are the market leaders and have gained ground by linking their devices with their smartphones. But Android is hoping that new software, new apps, messaging and cross-platform capabilities via the Android Wear 2 OS update will stimulate consumer appetite for smartwatches.
Growth opportunity in the payments space exists for the vendor that can boost demand for smartwatches. Business Insider pointed to the expansion of touchpoints that offer payments functionality. For example, 24 billion connected devices globally are expected by 2020, an increase of 7 billion from today, 5 billion of which will be consumer-connected devices. These devices include wearables, cars and home devices as part of the IoT.
A Business Insider report provided data on the connected device payments industry. Highlights included the vast opportunities opening up from the IoT and the increasing array of internet-connected devices. Card networks — Visa and Mastercard in particular — are building the infrastructure for the standardization of payments integration on universal platforms.
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