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Apple Watch may face uphill trek in driving mobile commerce

The Apple Watch will play a role in driving lower-value tap-and-go mobile proximity payments in travel and transit, but its likelihood of becoming a mainstream platform for mobile commerce is debatable due to lack of scale, high price points and a perception among consumers that wearables are novelty products.

Expected demand for the watch, which lets users receive calls, communicate by tapping on the interface, and features mobile applications promoting and measuring the user’s health, is expected to drive Apple to the top of the smartwatch market with 55 percent of global market share, according to Strategy Analytics. Although Apple Pay, the Cupertino, CA-based company’s mobile payment application, appears to be enjoying early success on the iPhone 6, it will not necessarily follow the same path on the Apple Watch.

“I do see a small potential for sales automation software to add the watch as another platform for their software,” said Sheryl Kingstone, Toronto-based research director for Yankee Group. “For example, Sage, and other customer relationship management vendors will eventually allow for task-oriented interactions such as logging calls, turn-by-turn directions or making a quick voice annotation into the account while traveling.

“However, I believe the real interaction for mobile CRM will remain with the phone and tablets for sales people,” she said.

Boosting Apple Pay
Tim Cook, Apple’s CEO, said in his presentation that the Apple Watch will jump-start the growth of Apple Pay, which is accepted at 700,000 merchant locations and supported by more than 2,500 banks. The app uses Near Field Communication to initiate secure payment transactions between contactless payment terminals and Apple devices such as the iPhone 6, iPhone 6 Plus and Apple Watch.

Cook emphasized that the Apple Watch is easier than an iPhone to use to make a payment using Apple Pay because the watch does not need to touch a merchant terminal or be unlocked with a fingerprint.

Apple Web site promo.

The user activates Apple Pay by being near the terminal where a NFC-enabled device detects the watch. A vibration alerts the consumer once a payment is made.

Like Apple Pay on the iPhone, no credit card information is stored on the device. A unique placeholder code exists on the device for each account.

Apple will have its work cut out persuading consumers to use the watch extensively for commerce, despite the excitement the maker of the iPhone, iPad and MacBook typically generates with new products.

Ovum, a British global technology research and advisory firm, said only 15 percent of respondents in its 2014 Consumer Insights survey plan to buy a smartwatch in the next six to 24 months.

“Apple will have to change this mind-set if it wants the Apple Watch to be successful, and next to beautiful design, clever applications will be a critical means to achieve this,” said Eden Zoller, principal analyst for consumer services and payments at Ovum.

“Wearables are a challenging environment for developers as the market is fragmented, while wearables present completely new form factors and usage scenarios.”

The watch’s potential to drive online purchases from a mobile device depends on the degree to which the user perceives it as making the process easier and more convenient.

“Friction reduction is the key to adoption of wearables, including the Apple Watch,” said Wilson Kerr, vice president for business development and sales with Unbound Commerce, Boston.

“While it might not seem like a big inconvenience, pulling out your phone, unlocking it, and completing an action takes time. If you have ever seen the Secret Service in action, they all have voice-activated microphones on their wrists,” he said. “There is a reason for this. It is all about fast and convenient access to a communication device,” he said.

The Apple Watch has the potential to drive in-store payments.

“Being able to tap your wrist against something to complete a secure, verified payment using Apple Pay is going to be something that, in my opinion, is going to be surprisingly useful and impactful for consumers,” Mr. Kerr said.

Forming partnerships
Whether the Apple Watch drives commerce will depend on how successfully Apple forms partnerships with companies outside its traditional spheres of influence.

High-end Edition model comes with solid gold case.

“While Apple doesn’t necessarily need to court new customers to maintain its market stature, offering a variety of customization options across three distinct Apple Watch collections may do just that,” said Ryan Martin, analyst, wearable technologies, at Yankee Group.

“Cross-sell/up-sell potential and the opportunity to sell into emerging mobile product categories are some of the most compelling reasons why OEMs like Apple are pursuing wearables.”

Final Take
Michael Barris is staff reporter on Mobile Commerce Daily, New York