Your credit card on your wrist Shop with your watch

Paying with smartphones has become part of everyday life. The hot trend now is paying with your watch.

by UBS Insights 15 Apr 2019

Joggers and cyclists know the problem: wallet and smartphone are so much excess weight. It’s safer and more practical to leave both everyday items at home. After all, you can buy a bottle of water or a coffee in other ways. You can now make contactless payments using wearables such as smartwatches or fitness bracelets: just hold one up to the card terminal, pay and you're done.

Pay with the ring on your finger?

Experts say mobile payment will become more and more important in the near future. According to a 2018 study by Mastercard, one in four Europeans can imagine paying with a wearable in the future. Providers of wearables are responding by marketing more and more options, ranging from smart rings and necklaces to smart key chains.

Wearables are becoming more popular not just because you can pay with them, but because a smartwatch also lets you read the news or check for missed calls. Fitness bracelets record useful data such as number of steps taken, blood pressure and heart frequency. And they make us more health conscious.

Paying with wearables – how does it actually work?

Just like a physical credit card, contactless payment with wearables also functions using Near Field Communication (NFC), in other words wireless information exchange. This in turn is enabled by “tokenization technology,” whereby the credit card number is securely encrypted and then stored as a virtual 16-digit number (token) on the wearable.

There are two different systems for the payment process:

Hardware-based system: UBS currently supports the hardware-based payment systems Fitbit Pay, Garmin Pay and Swatch Pay. This technology comes closest to a physical credit card. The wearable contains a chip (secure element) on which the above-mentioned token and all other data required for payment is securely stored and assigned to the relevant credit card. All that’s needed is for the wearable to touch the payment terminal, just like paying by credit card. With the hardware-based system, no Internet access is required for payment.

Software-based payment system: This technology is typically used on smartphones. It is based on a software solution by which the payment data is stored in a secure cloud. Up to ten transactions can be made offline, after which the device must be connected with the Internet again.

How secure is paying with a wearable?

Wearables are “in.” But as a means of payment, are they equally as secure as credit cards?

“Token-based payment solutions are also certified by Mastercard or Visa according to EMV standards and meet the same security requirements as a physical credit card,” explains UBS expert Marcel Drescher. There’s no difference between the hardware-based and the software-based system, confirms Drescher: “The type of tokenization makes no fundamental difference to the payment transaction.”

The payment function on smartwatches (e.g. Fitbit Pay and Garmin Pay) is protected by a PIN code. With Swatch Pay, transactions up to a maximum of 40 francs are possible without the PIN code. For purchases above this amount, the credit card pin must be entered at the terminal in the usual way. This limit can vary depending on the country.

What happens if the wearable is stolen? Here too, the card owner can block the payment function immediately, advises Drescher. They can do this in the manufacturer’s app.

Contactless payment: four myths

Our expert explains why credit cards with NFC are completely secure.

Today, billions of devices are connected with the Internet and the number is increasing at an astonishing rate. In theory, the development of the "Internet of Things" (IoT) gives clients absolute freedom to pay with an object of their choice. That’s why the number of wearables is also on the rise. As an innovative company, investing in new technologies and anticipating the latest trends is a UBS priority.

Paying with SwatchPAY!

Since January 2019, UBS account holders can use the SwatchPAY! payment system introduced by Swatch. This enables your Mastercard data to be stored on an NFC chip in one of the four Swatch models available for the system. Installation is quick and easy: clients install an app, scan their credit card and link the credit or prepaid card with the watch in the Swatch store. Quick, simple, contactless payment is then possible wherever NFC payments are accepted.