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Summary

The launch of the Apple Watch and its support for Apple Pay raise the question of whether or not wearable devices can become a mainstream platform for mobile commerce. Ovum believes that wearables will ultimately have a more narrowly defined m-commerce opportunity than smartphones and tablets, and will be best suited to lower-value “tap and go” mobile proximity payments.

Driving consumer uptake of wearables

Several key barriers are preventing wearables becoming a mainstream platform for m-commerce. Consumer demand for wearables is uncertain and will take time to build. Only 15% of respondents to Ovum’s 2014 Consumer Insights survey said that they had plans to buy a smart watch within the next six to 24 months. Many consumers still perceive wearable devices as a novelty and either do not understand the value proposition or are not convinced that it provides anything new or useful. This issue is perhaps not as acute for activity-tracking wearables such health and fitness devices, but it can be a real problem for multipurpose wearable devices.

Slow consumer uptake up means a lack of scale, which is a major problem for m-payment and marketing applications, but Apple is well-placed to create a buzz around wearables. The new Apple Watch has strong design credentials, but its high price point ($350 to $17,000) will probably be palatable only for committed Apple fans.

Ovum predicts that by 2020 multipurpose wearable devices, including smart watches and glasses, will account for 30% (176 million) of the total wearables installed base. This is modest compared to the projected growth of smartphones and tablets: Ovum forecasts that the global installed base for tablets will reach 2.05 billion by 2019; in the same year there will be 4.42 billion global smartphone connections.

Next to beautiful design, clever applications will be an important way of driving consumer uptake of multipurpose wearables. The most successful multipurpose wearables in the longer term will be those that have strong supporting ecosystems of developers and applications behind them. This is clearly what Apple intends for the Apple Watch range, and Apple Pay is part of the equation. However, although Apple Pay appears to be enjoying early success on the iPhone 6, it will not necessarily follow the same trajectory on the Apple Watch. The majority of consumers are still getting to grips with the concept of mobile payments on their smartphones, let alone on smart watches. M-commerce applications on wearable devices may be a case of too much, too soon.

Wearables also create a challenging environment for developers. The market is fragmented, and wearables represent completely new form factors and usage scenarios for m-payments and other applications. They will ultimately have a more narrowly defined m-commerce remit than smartphones and tablets. Multipurpose wearables such as smart watches will be best suited to lower-value “tap and go” mobile proximity payments in travel and transit, for example, and in associated proximity applications such as access control.

Appendix

Further reading

Location-Based M-commerce: Trends, Opportunities, and Challenges, TE0003-000766 (May 2014)

“Samsung’s m-payments move will intensify the mobile wallet wars,” TE0003-000830 (March 2015)

Author

Eden Zoller, Principal Analyst, Consumer Services and Payments

eden.zoller@ovum.com

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