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Payments Wedded to Wearables Will Likely Survive the Collapse of Jawbone, Data Show
July 14, 2017

By John Stewart

Hopes for wearables payments may have taken a blow last week when fitness-band maker Jawbone Inc. announced it would shut down, but fresh data indicate funding for wearables startups remains robust.

Image Credit: Jawbone

The UP4 wearable offered contactless payments made with American Express cards.

Financing deals totaled 41 in the second quarter, according to CBInsights, a New York City-based investment-data firm. That’s the second-highest number recorded since the firm began tracking the sector in 2012. It also represents a slight rebound from the 36 deals notched in the first quarter and nearly equals the record 42 rounds seen in the last three months of 2016.

All told for this year, CBInsights forecasts wearables startups will clinch 150 funding deals, one more than in 2016. Investment dollars, however, will cool off, totaling $628 million. That’s after a record $1.86 billion poured into startups in 2016. Wearables firms have attracted $327 million in venture capital so far this year. “With over 521 deals and $4.58 [billion] in funding since 2012, the industry still seems to be attracting investors,” says the firm in a research note.

Wearables, a category of technology ranging from fitness bands to smart watches to chip-enabled clothing, have been a target for payments companies for at least the past three years or so. Perhaps the best known example is the Apple Watch, which Apple Inc. rolled out in April 2015 with Apple Pay mobile-payment capability. And Jawbone in 2015 clinched a deal with American Express Co. to work digitized card payments into its UP4 wristband.

Out of some 91.5 million wearable devices shipped in 2015, nearly 13% had payments capability embedded in them, according to researcher IHS Inc. The firm predicts that share will rise to 45% of 340 million annual shipments by 2020.

A big part of the attractiveness of wearables for payments providers lies in the market that buys the gadgets. Demand comes mostly from young, upscale consumers with a proclivity to use digital banking and payments, according to research from Javelin Strategy & Research, Pleasanton, Calif. Eighty percent of wearables owners used mobile banking and 85% were online bankers, according to a report released by Javelin in 2015. The wearables users were also younger, wealthier, and more active in using digital banking and payments than even owners of smart phones and tablets, the report said.

The demise of Jawbone came as a shock because the company had raised $929.9 million in venture funding over its 17-year history, second only to the capital raised by another failed startup, alternative-energy firm Solyndra, CBInsights says. The fitness-band company’s valuation, indeed, ranked it among the unicorns, an exclusive club of privately held startups valued at $1 billion or more.

But Jawbone’s collapse doesn’t seem likely to sour investor interest in wearables technology. “Though annual funding has seen greater volatility in recent years, deals have been on an upward trend since 2012,” notes CBInsights.

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