Paying for a coffee, sandwich or groceries by simply waving your watch or smartphone at a payment terminal could become a part of everyday life as soon as this Christmas. But too many different and competing choices of payment methods may confuse consumers and slow its uptake.

It is only a couple of years since ‘tap and pay,’ the ability to make payments in a shop by tapping a credit or debit card on the front of a compatible reader was introduced. Supported by the major banks as well as VISA, MasterCard and American Express, it was rapidly embraced by consumers. According to MasterCard, over half of its transactions in Australia are made this way.

Fast forward a couple of years, and ‘tap and pay’ is beginning to look as passé as ‘chip and pin’ or the good old ‘click-clack’ before it. With 370,000 smartwatches sold in Australia in 2014, as well as growing interest in smart watches and smart wristbands, a number of companies are moving quickly to enable payments with these devices.

Banks letting you pay by phone

Commonwealth Bank and Westpac customers using some models of Android smartphones can already ‘tap and pay’ using these phones instead of their cards. ANZ is due to launch a similar service later this year, but National Australia Bank has yet to announce any plans in this area.

This functionality is, however, currently restricted to smartphones. Although the Commonwealth Bank and Westpac were quick to introduce apps for Android and Apple smartwatches, they do not include payments functionality. Lisa Frazier, the Commonwealth Bank's Head of Digital Channels, has said the bank will launch payment functionality on the Apple Watch soon, but would do so when they were happy with its security: “It's more important for us to be safe and secure than first.”

Optus to let watch pay

While the banks have not confirmed plans to allow payments via wearable devices, Optus is set to launch its own smartwatch and smart wristbands capable of making payments in time for Christmas.

“We want our customers to see their phones as a natural evolution to paying for goods and services anytime, anywhere,” said Ben White, Optus’ Vice President of Mobile Marketing. Australia’s second biggest telecommunications company already operates a smartphone-based ‘tap and pay’ similar to the Commonwealth Bank and Westpac.

Apple silent on launching Apple Pay

Apple remains silent on plans to launch Apple Pay in Australia. Apple Pay allows iPhone 6, Apple Watch and some iPad owners to ‘tap and pay’ with these devices at over 700,000 locations in the USA, but not yet in other countries. Launches into Canada and the UK, where Apple has large market-shares, are planned for later this year, meaning Australia cannot be far behind, given Apple’s large presence here.

Confusion for consumers

The drawback for consumers is the range of options to pay by smartphone, smartwatch or wristband is wide and confusing. Unlike ‘tap and pay,’ not every option is simpler than its alternatives, a key factor in driving rapid uptake.

Overall the uptake of payments via wearables in Australia continues to lag behind some other developed countries, notably the United States, but is expected to increase as the big four banks update their technology offerings to allow for easier access.
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