Why wearable tech opens consumers up to spending risks

Shoppers looking for an easier way to pay for purchases at retail could get a shot in the arm from a new wristband that promises to wirelessly and securely authenticate transactions without requiring a password.

Unfortunately for consumers’ bank accounts, technologies that make it ever easier to pay can also be dangerous for their financial health.

Sign in - with your heartbeat

Toronto-based startup Bionym is marketing the device, called the Nymi Band. It looks like a simple wristband, but it uses the wearer’s electrocardiogram (ECG) to authenticate transactions by using the individual’s heartbeat to sign in. The technology is built on the premise that everyone’s heartbeat has a unique biometric signature, similar to a fingerprint, retina scan, facial layout, or even outer ear impression.

The device forms the centrepiece of a just-launched pilot program involving some of Canada’s largest banks, including RBC, and credit card processors, including MasterCard. The Nymi Band promises to address the often sticky business of authentication - which depending on how it’s implemented can either slow down the process by requiring relatively hackable passwords and PINs, or rely on easily stolen contactless dongles, keycards and related forms of authentication.

The company says the program is the world’s first biometrically authenticated wearable payment pilot. It says the ECG-based wristband streamlines the point-of-purchase experience, and is more secure than conventional payment solutions.

Bionym currently has 35 employees, and has 10,000 pre-orders for the $79 device, which is its first offering. The company will allow customers of RBC and other issuing banks to sign up to test the biometric-based authentication method before the end of 2014.

Taking the brakes off of spending

Personal finance expert Rubina Ahmed-Haq says the combination of greater security and ease-of-use is hard for many time-challenged consumers to ignore.

“It is just another way for consumers to pay quickly and easily,” she told Yahoo Canada. “Choice is good. I love the credit tap option and don’t miss having to carry cash around.”

That choice and seamlessness both come with a cost, however. Ahmed-Haq says technology can make it too easy for some consumers - namely those who may be somewhat less personal finance-savvy - to overspend.

“If someone is easily convinced to spend and blow their budget, this will make it easier,” she told Yahoo Canada. “Technology is a powerful tool to help us organize our finances and make it easy to pay for everyday things but it can take away the feeling of knowing that in the end ‘I’ am responsible.”

John Maisey, of Maisey Financial Services, says new payment methods contribute to a troubling psychological shift that’s been evolving for decades, since credit cards first became mainstream tools for consumers.

“As a financial advisor, I am always concerned with the ease with which consumers can access credit,” he said in an interview. “We have moved from being save and pay consumers to pay and figure out how to pay off later consumers.”

Doesn’t skip a beat

To use the Nymi, the user touches the electrode on the top of the device, which closes a circuit and then measures the wearer’s ECG and uses it to sign into a given online system such as a point-of-sale device or mobile terminal. Each device has a unique serial number, and uses encryption for additional security. Communication with external devices is managed through a secure Bluetooth connection.

The technology promises to banish notoriously weak passwords and PINs, but it doesn’t leave the consumers who use them off the hook. Ahmed-Haq, who also writes the AlwaysSaveMoney.ca blog, says new payment methods like the Nymi put more pressure than ever on consumers to take control of their spending both online and in-store.

“As new and easier ways to pay are created, it is important to log on regularly to your online bank account and see how you are spending,” she said. “Seeing the debits and credit in front of you will help put your spending into perspective.”