Wearables give us a unique opportunity to improve the security of financial transactions.
Artefact, a Seattle-based company that designs technology products, recently created a concept for a next-generation payment wristband. Called Token, the wristband is designed to not only make payments easier and more secure but to help wearers make smarter decisions about how they spend. For our upcoming report on the future of currency and payments, we asked Artefact co-founder and principal Rob Girling—who will speak on innovation in payments next week at Efma’s Retail Payments Week in Paris—and design director Craig Erickson about their inspiration for Token and its potential to come to market. In an email interview, they shared some thoughts on how payments might change.
What is Token, and how does it work? What was the impetus for creating it?
Our inspiration for Token was driven by three factors. First, miniaturization and the advance of sensor technology have made wearables one of the hottest new technology areas. Yet the majority of explorations in the space focus on measuring ourselves, on health and fitness. We challenged ourselves to think about how a wearable form factor can transform experiences that are less about measuring and more about interacting with each other and the services we use.
The focus on financial and retail services came from the realization that wearables give us a unique opportunity to improve the security of these transactions. That is a huge problem not only for the finance and retail industry but for us as consumers. How often do you have to replace your credit card because it was compromised or when you lose and misplace your wallet? Finally, we wanted to explore a way to help people be smarter consumers and minimize impulse purchasing by showing them the impact of the potential purchase on their balance before they hit the “pay” button.
Token is a concept for a wearable bracelet connected to select payment accounts from checking and savings to credit cards, digital currencies and PayPal accounts. Unlike a credit card, it features a security mechanism based on three unique aspects of its owner: something she is (a unique biometric like a thumbprint or your heartbeat), something she knows (a PIN or password) and something she owns (the device itself). Unlike a credit card, it becomes useless when lost or stolen as only your print, or PIN, can authorize it.
Have you created a working prototype of Token, and have you received feedback from payment processors or vendors?
The technology to make a device like Token a reality already exists. It would take longer for it to be fully integrated into the financial and retail infrastructure, but we are definitely seeing interest and attempts to accelerate that.
Since we released Token, we have heard from quite a few organizations that are interested in exploring the idea further. In fact, some financial institutions have already announced that they are working on wearable payment devices. We believe that as wearables become more mainstream and the Internet of Things becomes a reality, we would see a wider range of services and experiences delivered through a wearable or even invisible form factor.
Which industries or sectors are particularly open to payments through wearable tech or mobile?
As with any technology innovation, we think adoption of wearable and mobile payments will be faster in some industries than others. The speed of adoption depends on several factors: how innovative the industry is, how regulated it is, and to what extent mobile and wearable form factors are already part of the industry’s channels. Technology and retail industries are fairly quick to adopt new channels. On the other hand, we are already seeing the travel and tourism sectors embracing wearables. And the intrinsic advantages of biometric security that wearables provide can create a strong incentive for quick adoption by industries that demand high level of security.
The pace of adoption of new technologies is accelerating. Just a few years ago, we could not imagine making appointments, shopping or dating via our phones. Today, wearable devices that pay bills may seem like something out of sci-fi, but the technology is already here.
What needs to happen before Token can become a reality?
From sensors to iBeacons, the technology to make Token a reality is already here. For such a new form of payment to become real, however, infrastructure changes are key. So is the need for industry standards. Neither of these will happen overnight, but the interest and potential benefits are high enough to make us optimistic that a Token-like device is not far into the future.
Do you foresee strong consumer interest?
One of the reasons we believe consumers will embrace a device like Token is its potential to make you a smarter consumer. Insights from behavioral economics are unambiguous. When we are shown the negative outcomes of our choices, we are more likely to make the right decision. That is why swiping your credit card for that pair of shoes you cannot really afford is much easier than paying for them with cash. So, what if you could see how this purchase will impact your budget right before you pay? A device like Token that shows you the balance of your account before you confirm a purchase could minimize impulse decisions, helping you plan your finances better and stay within budget.
In addition, more and more financial institutions want to build a relationship with customers that goes beyond the transaction. A platform like Token allows banks to become not only the guardians of customers’ finances but smart advisers that deliver services in the context of your daily life.
Do you think the advent of novel forms of payment will change spending patterns or behavior?
Today, we know what motivates our behavior more than ever before. For example, understanding our attitude toward gains and losses explains why credit cards are especially appealing—they allow us to experience gains in the present and push losses into the future. This knowledge, together with new forms of payment, can be used to drive toward positive behavioral changes or to take advantage of our human weaknesses. It is our role as designers to use this understanding to imbue technology innovations with the nudges that lead toward the better outcomes.
Are there noticeable generational differences when it comes to perception of currency?
There is definitely a difference in attitudes toward brands, shopping and financial institutions. Millennials embrace new technology and are skeptical of institutions whose values do not support social responsibility. So whether you are a fashion brand, a retailer or a bank, if you want to build the loyalty of this huge segment, your services and values need to align with those of the Millennials.
What new types of brands have started to move into the financial space?
The pace of innovation in the payment space is definitely accelerating. Relatively new players like Square, Simple and Coin are introducing new models and services. But traditional financial institutions are not lagging far behind.
One of the more interesting developments is how companies like Amazon and Apple are positioning themselves to be players in the space. With a solid technology and delivery infrastructure, a rich merchant network and, since August, a card reader and mobile app for transactions, Amazon can quickly establish itself as a player in the financial space. Apple, on the other hand, has captured the hearts and minds of consumers. Their ability to introduce new apps and services via experiences people love can be key in establishing a new payment method as the norm. It will be interesting to see what their highly anticipated wearable device will bring.
If chip-and-PIN cards are already considered old, what will leapfrog that technology? Will it be the mobile wallet or something else?
On the technology front, we believe that biometric security will result in instrumental changes to the payment ecosystem. In fact, Token is based on Artefact’s patent-pending unique security mechanism: something you have (the payment device), something you know (a PIN or password) and something you are (a unique biometric like the heart rate). We also think real innovation will result from a different approach to payments. The real opportunity lies in approaching payments in the context of the overall customer experience and in delivering value based on the insights we glean from these interactions.