What it means
A wearable contains sensors, a small computer and a wireless link, usually to a phone. It can count steps, track heart rate and sleep, give directions or alert the wearer to messages.
Many models also support contactless payments, so a user can pay by tapping the wrist at a terminal. For banks and payment companies, wearables are another way to reach customers.
A card or account loaded into a smartwatch lets people pay without taking out a phone or wallet. Payment details are replaced by a token (a stand-in code that is useless if stolen), which adds a layer of security.
Insurers and employers use the data from wearables in wellness programmes. Some life and health insurers offer discounts or rewards to customers who meet activity targets, while some employers subsidise devices to support health.
The finance question is whether the savings from fewer claims or less sick leave exceed the cost of the programme. There are risks that a manager should weigh.
Health data is personal and often legally protected, and customers may object to being monitored. Insurers also have to avoid unfair discrimination, and a reward scheme can favour people who are already healthy.
For investors and businesses, wearables are a consumer hardware market with fast product cycles and high competition. Sales depend on new features, brand strength and the supply of components.
Companies selling them often earn additional income from subscriptions and services linked to the device. Security and cost control complete the picture for a finance team.
Lost or stolen devices need to be locked remotely, and replacement cycles of two to three years should be built into the budget. Without those controls, a cheap pilot can quietly turn into an expensive and unmanaged fleet.
In practice
Real-world examples.
Example
A commuter taps a smartwatch on a ticket gate and pays for a train journey. The watch holds a tokenised version of the card. The payment is processed in the same way as a card tap.
Example
A health insurer offers lower premiums to customers who share activity data from a fitness band and reach a target of steps each week. The insurer uses the data to price risk more accurately, and customers receive a discount of up to 10%. Privacy rules govern how the data can be used.
Example
A logistics company gives warehouse workers a wearable scanner on the wrist so they can scan parcels hands-free. The company measures a 15% improvement in picking speed. The finance team calculates the saving in labour costs against the cost of the devices, including the batteries, repairs and training time.
Formula
Calculation
Payback period = Total programme cost / Annual savings
Suppose an employer buys 500 wearable devices at $100 each for a wellness programme, costing 500 x 100 = $50,000. It also pays $10,000 for the supporting software platform in the first year, so the total cost is 50,000 + 10,000 = $60,000. If the programme saves $40,000 a year through lower sick pay and lower insurance costs, the payback period is 60,000 / 40,000 = 1.5 years. The employer breaks even after about eighteen months.Case study
Seen in the real world.
Northgate Logistics is an illustrative, fictional company that employs 300 warehouse staff. The operations director proposed buying wearable scanners at a cost of $150 each, a total of $45,000, to speed up picking.
The finance manager asked for a pilot first. Over three months, 30 staff used the devices, and picking speed improved by 12%, which was worth about $18,000 a year across the pilot group.
In this illustrative story the company extended the programme to all warehouse staff once the pilot showed the payback was under a year. The lesson is that wearable technology should be judged like any other investment, with a clear cost and a measured benefit, and a small pilot is the cheapest way to find out.
Watch out
Common mistakes.
- Buying devices because they are fashionable, without a measurable business case or a payback calculation.
- Ignoring data protection, when health and location data collected through wearables is often strictly regulated.
- Counting the price of the device only, and forgetting the cost of software, support, replacement and training.
Questions
People also ask.
Can I pay with a wearable?
Yes, many smartwatches and bands store a tokenised card and support contactless payments, using the same payment network as the card, so the merchant pays the same fees and the customer has the same protections.
Do insurers really use wearable data?
Some offer rewards or discounts for healthy behaviour, but practices differ by country and by product, and rules protect customers against unfair use of their data.
Are wearables a good investment for a company?
It depends on the use, and the answer should come from a pilot that measures benefits such as productivity, savings or customer reach against total costs.
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