Fitbit Acquires Mobile Payments Technology But Won’t Add This Year
Fitbit is moving to add a mobile payments feature to its market-leading line of activity trackers, but slowly.
The company purchased wearable payments technology from startup Coin last week, but won’t integrate the feature into new bands until at least next year, CEO James Park told Fortune. The deal also includes intellectual property and key engineering and sales personnel from Coin, but doesn’t involve the company’s mobile wallet.
Fitbit did not disclose the sales price, but Park said it was not material to the company, which reported almost $2 billion of sales last year.
Park says his strategy is to keep Fitbit’s primary focus on activity tracking and health features, while adding a few conveniences to its devices. Pointing to prior examples such as adding text notifications and calendar alerts, Park says the touchless payments feature could come in handy for users wanting to make purchases on the go thus increasing the “overall usefulness” of Fitbit’s devices.
Coin’s wearable technology is based on a Near Field Communication, or NFC, chip, which requires that a retailer have a compatible checkout register. Thanks to Apple Pay, Google’s Android Pay, and other NFC-based payment programs, an increasing number of stores and even vending machines have added compatible readers, but the vast majority of retail outlets remain incompatible.
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“This is still in the early days,” Park says explaining why the company will wait before adding mobile payments. While its engineers work to incorporate the NFC technology, Fitbit (FIT) also hasn’t decided just how it will integrate payments as a feature, whether with its own solution or by partnering with one or more of the existing players, he said.
Competitor Jawbone already offers one device with an NFC chip for payments via American Express, notes James Wester, research director for IDC Financial Insights. “Wearables has become a larger focus in payments—being able to integrate payment capabilities into watches or rings or clothing,” Wester says. “It’s about convenience, so enabling that capability in a fitness tracker makes particular sense because your options for a wearable are pretty limited when someone is exercising.”
Fitbit sold nearly 5 million of its devices in the first quarter, ranging from the simple $60 Zip tracker to the $250 Surge smartwatch, a 23% increase from last year. After selling over 1 million of each of its latest models, the $200 Blaze and $130 Alta, in the quarter Fitbit will have additional new products later this year, Park says.
But sales growth has slowed somewhat, with sales rising 50% in the first quarter, down from a 92% increase in the fourth quarter of last year and 168% in the third quarter. Wall Street is worried Fitbit will eventually succumb to an onslaught of competitors, from Apple at the high end to Xiaomi at the low end. Fitbit shares, down over 52% this year, gained 1% to $14.37 in morning trading on Wednesday.
Coin, which is largely shutting down after the sale, started in 2013 offering a card-sized digital wallet device with a magnetic strip that could mimic a user’s credit card. An updated version last year added an NFC contactless payments feature. And in January, the company also showed off possible wearable NFC devices. But Coin suffered lengthy delays delivering its wallet device, which also had reliability issues, according to some reviewers.