As computing devices get closer to the body and more Internet-connected, payment platforms will have to be flexible enough to work in a vast number of environments, according to PayPal's Joel Yarbrough.
"Ultimately, the ability to pay or be paid can be embedded everywhere," said Yarbrough, senior director of partnerships and global solutions for PayPal, which is preparing for a future in which Internet-connected consumer products other than tablets, PCs and smartphones can be used for payment.
PayPal has aggressively ramped up its adoption of wearable devices, especially the fast-growing range of smartwatches. It supports the Pebble, Android Wear and Samsung Gear smartwatch platforms.
PayPal sees wearables as a means to create seamless, context-driven payment experiences, Yarbrough said. "Wearables give us the ability to combine data like location with a great notifications experience, which is much more convenient for users."
The wearable computing trend is relatively new. Google's Android Wear platform launched only this year, and the Apple Watch is still unavailable to purchase. Devices like the Pebble watch and Google Glass are typically worn by early adopters.
But that's expected to change. Global wearable device shipments will increase more than 400% by 2017, reaching 116 million units, up from 27 million in 2014, according to Juniper Research.
Rick Oglesby, a senior analyst and consultant at Double Diamond Payments Research, has said issuers must form a long-term strategy for wearable technology, particularly ahead of the Apple Watch's 2015 release.
Yarbrough envisions creating a digital identity that can be linked across a dozen different devices, with the consumer's preferences stored in the cloud.
"When thinking about the future of all of these innovations and how payments fit in, we need to think about what context of payment is needed," Yarbrough said. "It's not necessarily that payments fit one of these technologies better, it's all about how it is applied to meet the contextual needs of the consumer."
Other companies, such as Walt Disney Co., Barclays, CaixaBank and RBC have tested payment-capable wristbands. In the RBC example, the band also adds biometric authentication.
Yarbrough also sees a security role for wearable devices. "Wearables allow us to combine interesting sensors together to get a great picture of who the user is, how he or she moves over time, relative to other devices and places, what they do, where they go, etc.," Yarbrough said. "This enables us to build great first-party authentication and security, or use it as part of a larger multi-factor system which removes user friction, but without compromising security."
While PayPal develops use cases for wearable computing, it's also considering the role of other devices. Watches and wristbands won't replace smart phones, Yarbrough said.
"Wearable payments aren't a replacement for mobile payments, but an extension," he said. "They further connect our digital and physical worlds, bridging the gap between online and offline shopping experiences."