Security Concerns Wearing Down Confidence in Paying With Wearables

Almost half of Americans are willing to make payments through their watches or other wearable devices, but security concerns are stopping most people from actually doing it, according to new research from payments technology company Transaction Network Services.

The company’s survey of 1,046 UK adults, 1,050 U.S. adults and 1,022 Australian adults found that 47% of Americans were willing to make a payment using a wearable device such as a ring or bracelet, but 64% said security concerns stopped them from actually using such devices to pay for items.

“Living in the era of the cybercriminal and regular news reports concerning data breaches, it is not surprising to find that consumers exhibit security fears related to wearables,” TNS said. “While no unscrupulous activity related to payments made via wearable devices has yet been exposed at the time this report goes to press, the growth of this promising market segment could be irrevocably damaged if fraud was to occur.”

Men and Millennials More Willing to Pay With Wearables

Globally, 48% of men and 39% of women said they were willing to make payments with wearable devices. Among people 34 and younger, at least 57% were willing to make wearable payments, compared to 48% or less among age groups 35 and older.

But even among respondents who had smartwatches, fewer than half said they had actually used them to make payments.

“Twenty-three percent of the respondents we surveyed confirmed that they owned a smartwatch. Of these, 44% confirmed they have used it to make a payment, with U.S. adults showing slightly higher adoption levels,” TNS reported. About half of people 25-44 said they had paid for something with their watches compared to fewer than a third of those 45 and older.

Across age groups, most people said worries about security kept them from making payments with wearable devices. The proportion of those deterred ranged from 61% in the 16-24 age group up to 75% in the 55-64 age group.

Wearables No, Smartphones Yes

The idea of paying with wearable devices may be scaring some people away, but many were comfortable paying via smartphone, the TNS data showed. Over half of Americans (59%) in the survey said they liked to use mobile payment apps on their smartphones because they were quick and easy.

“As with the responses given in relation to smartwatch payments, females were more hesitant than males to use mobile payment apps on their smartphones, but the percentage gap was much smaller,” TNS noted.

Cash Preferences Relatively Low

Whether and how payments behavior will transition to wearable devices may be unclear, but consumers’ growing preference for noncash payments was evident, according to the survey.

“When asked whether they prefer to use cash for the majority of their transactions, we found 70% of respondents said that they rarely use cash,” the study reported.

“Of those that said they rarely use cash, 85% confirmed that they prefer paying by using their credit/debit card and the remaining 15% agreed that they prefer to use their smartphone or wearable device to make the majority of their payments,” it added.

Consumers seemed to have a different set of concerns about these payments, according to the research.

“Despite the majority giving their support for cashless systems, 71% of our respondents also felt that universities offering cashless payment systems are an easy way for students to get into debt as it is so easy to make purchases without thinking about the cost implications,” it said.

TNS also found that 60% of Americans made at least one contactless payment per week. That lagged behind 75% of Australians and 79% of people in the UK.

“When looking at the quantity of contactless payments made in an average week, we found that more than one in five respondents aged 16 to 44 made between 6-10 contactless transactions a week,” it added.

Barring a major security incident, new payment methods will increase as a percentage of the payments mix, TNS said.

“Players within the industry should expect and plan for this now to ensure they are best positioned to benefit from this market evolution,” it noted.