The rise in contactless payment as a result of the growing usage of contactless cards and Near-Field Communication (NFC)-enabled mobile payments is driving the wearable payments market.

Read more: Contactless Payment Systems On The Rise Amid COVID-19 Pandemic

In large part, this usage reflects a growing trend in changing consumer behavior regarding payment habits and trends, driven by maturing smartwatch technologies, evolving tokenization platforms, and the convergence with other end verticals such as ticketing and transport, and fitness and health applications. As a result of these trends, global tech market advisory firm, ABI Research forecasts US$7.2 billion in global revenue from the sale of payment-enabled wearables in 2024, says a news release.

A combination of technology maturity, consumer popularity, familiarity with contactless payments, and the unique external phenomena (and notably COVID-19, whereby contactless is being pushed as a safe and hygienic alternative to cash by the payment networks, merchants, government, and the World Health Organization) is accelerating today's market adoption of contactless technologies. Wearable devices are primed to take advantage of this trend, with increasing choice and flexibility in terms of form-factors and available payment methods.

Ecosystem players such as wearable OEMs, silicon and IP providers, payment enablers, and financial application developers are all working to develop wearable payment experiences that are EMV-compliant, lightweight, interoperable, and intuitive UI. But most importantly, wearable payment technology can easily converge with other applications, such as loyalty and rewards, fitness and health, ticketing and transport, access control, etc., offering up new revenue streams and business opportunities for the various stakeholders.

This can be seen primarily by the growing adoption of open-loop payment systems in active devices such as smartwatches, which are outstripping closed-loop passive devices (such as silicon wristbands) in terms of shipment numbers over the forecast period. Regardless of device type however, increased merchant acceptance and growing consumer adoption serve to highlight the ease and convenience of wearable-enabled payments.

Some of the top players in the market include Apple, CPI Card Group, G+D, Idemia, Infineon, MasterCard, NXP, Qualcomm, and Thales Gemalto, all of which are pushing through innovative solutions in the space. While wearable payments is a small market today, it is not niche. There are increasing and lucrative opportunities that will continue to push adoption and usage, and showcase new applications, including M2M payments, pay on demand, micropayments, 5G for instant B2B payments, and beyond, such as access control and transit.

Read more: Wearables Market Projected to Grow 137% By 2024

These findings are from ABI Research's Wearable Payments Ecosystem application analysis report. This report is part of the company's Digital Security research service, which includes research, data, and ABI Insights. Based on extensive primary interviews, Application Analysis reports present in-depth analysis on key market trends and factors for a specific application, which could focus on an individual market or geography.