When will we see Fitbit's payments wearable?

Fitbit's earnings report included significant news, namely that 36% of the 3 million devices sold over the first quarter were repeat customers purchasing their second Fitbit device.

The company's overall earnings report provided an optimistic overview on their fitness wearables business over Q1. Fitbit reported a loss of 15 cents per share rather than the expected 18 cents per share. Reported revenue also came in above analysts expectations: $299 versus $280.8. This bodes well for not just the future of the company, but potentially as a means of driving contactless payment adoption.

Smartwatch inevitable, but when? In the face of a market increasingly saturated with generic fitness trackers, Fitbit needs to differentiate with devices that have capabilities beyond counting steps and tracking sleep. Telegraphing directionally where Fitbit is heading, the company acquired not one, but two smartwatch companies in 2016 - Pebble and Vector.

Further, CEO and Founder, James Park, stated in the Q4 2016 earnings call, “We believe the evolving wearables market continues to present growth opportunities for us that we will capitalize on by investing in our core product offerings, while expanding into the smartwatch category to diversify revenue and capture share of the over $10 billion global smartwatch market.” There have been multiple reports of delays in production due to hardware issues, but it is inevitable that the Fitbit smartwatch is on its way.

Cashing in on Coin. In May 2016, Fitbit acquired Coin’s wearable technology assets but to date there has been no announcement of the use of this technology within Fitbit devices. Coin failed to ignite as yet another example of the perennial card aggregator concept but its technology may well find a more appropriate home within a wearable form factor. Indeed, a recent report from Yahoo! Finance indicates that the new watch will have embedded NFC capabilities, although whether this makes it to production remains to be seen.

Moving the Needle on Contactless? With the transition to EMV POS devices in the US, the market is well seeded on the merchant side of the payment equation with terminals that are ready to accept NFC payments. Given the widespread dissatisfaction with EMV transaction times, there would seem to be a ripe opportunity for contactless payments to improve speeds and both merchant and consumer satisfaction. However, habitual usage of contactless payments via smartphones remains low.

A March 2017 report from First Annapolis highlights that habitual contactless payments are lukewarm in the US - just 8% of iPhone owners pay with Apple Pay one time a week or more. This is even lower for Samsung Pay - 6%, and an anaemic 3% for Android Pay. Would the smartwatch form factor make a difference? This seems unlikely. An October 2016 survey from 451 Research shows that just 12% of consumers see making mobile payments as important in their purchasing decision of a smartwatch, down from 14% in April 2016. If the Fitbit smartwatch is to gain traction in payments, then highlighting the speed and convenience of the transaction over cards and cash would be a smart focus for marketing messaging.

The good news for Fitbit is that they are building significant brand loyalty and payments functionality within a fitness oriented smartwatch makes a lot of sense. Runners are notably minimal in the accoutrements that they carry. The ability to have your wallet on your wrist may well be the perfect placement for Fitbit’s athletic customer base.