Fitbit finds its place in the fintech world

Fitbit's expertise in monitoring exercise and health seems pretty far removed from the world of payments, but the company is running full-speed into the world of fintech.

As with many tech companies, Fitbit is finding that payments are a means to an end. Just like Uber and Starbucks pioneered new forms of mobile payments to facilitate ride-sharing and coffee sales, Fitbit sees payments as the key to its growth in fitness tracking.

Fitbit's Ionic smartwatch, launched in August, enters a market where many fitness-tracking features are built into other wearables. Some of these, such as Apple Watch, incorporate payments, so why shouldn't Fitbit?

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In launching Fitbit Pay, Fitbit determined that payments could be an enabler of wider use of its fitness-tracking wearables.

"Fitbit Pay offers us the opportunity to reach a broader audience through new channels," said Lindsay Cook, vice president and head of consumer devices at Fitbit. "It was created not only to help users stay motivated … but also to easily stay connected with the features and smart functionalities to help them get through their day, without requiring access to their phone."

Many early mobile wallets envisioned a future when consumers would venture out to exercise or run errands without their wallets, but with their phones in hand. Fitbit takes this vision a step further, imagining a world where even the phone is optional.

"[Ionic] makes it possible for a user go for a run (or on a coffee run) and not worry about needing to bring their phone or wallet, since they can pay directly from their wrist," Cook said.

Adding payments and access to other financial services through a bank and merchant network enables Fitbit to diversify in a challenging market. Fitness bands have struggled to gain ground at times, though they're usually among the more popular wearables. Fitness bands have also faced questions about their usability as payments devices because their core function is too far afield from financial transactions.

Other attempts to tie health to payments have been mostly experimental, such as RBC's use of heart rhythms as an authentication factor for transactions via wearables. And fitness bands have had varied success. American Express is planning to discontinue support for Jawbone's wearable, and Apple Watch has faced criticism over the flexibility of its technology for use as a payments device. But there are also signs of life, as Garmin recently added support for Fit Pay (unrelated to Fitbit Pay) on its smartwatch.

Though downplayed in Fitbit's marketing, payments is a large part of the company's expansion. It acquired Coin's technology for the specific purpose of adding financial services to wearable devices, and the company is showing signs that it's successfully building a base of loyal consumers.

Cook would not disclose uptake for Fitbit Pay, Fitbit Ionic or other devices, but did mention the company has secured partnerships with Amex, Bank of America, Boeing Employees Credit Union, Capital One, First Tech Credit Union, and U.S. Bank—with other banks in the pipeline. It has also introduced Fitbit Pay into Australia, New Zealand, Ireland, Spain, Switzerland and the U.K., and non-U.S. banks and card issuers including ANZ, ASB, Carrefour, CBA, NAB, KBC and Sterling Bank. Fitbit Pay's merchant network includes Amazon, Best Buy, Dick’s Sporting Goods, Kohl’s, Macy’s, REI, Target and Verizon.

"By working with banking institutions globally, we believe we can substantially increase our reach, with Fitbit Pay as the catalyst for these partnerships," Cook said.

While there's reason to think that network-connected technology, which brings the point of purchase closer to everyday devices such as refrigerators and cars, will boost payments dramatically, there's still considerable uncertainty over how much the Internet of Things will permeate consumers' daily lives.

"I do think IoT will drive a massive uptick in payment volumes over time, particularly 'machine to machine,' " said Gareth Lodge, a senior analyst at Celent. "Imagine going to a gas station and the car automatically authorizing you to use a pump and pay without getting out your wallet."

What is less clear is what exactly will happen, Lodge said. "There will undoubtedly be a market for wearables, but the question is how big and what next? For example, how many runners do you see without headphones on—that are all connected to the runners' phones?"

Fitbit is tackling this uncertainty with more diversification. As it expands its financial services network, Fitbit is also adding more health-related features to accompany payments and other financial services, Cook said, giving its SpO2 sensor (a measure of oxygen saturation) as an example.