Swatch updates mobile-payment watches for China, linking with UnionPay to keep sales ticking

Swatch Group, which claims to be the world’s largest watch maker, has launched the second generation of its chip-embedded devices that can be used for mobile payments in China, after teaming with UnionPay to offer “Swatch Pay”.

The new watches can be linked with credit cards issued by 11 partner banks – including Bank of China, Industrial and Commercial Bank of China (ICBC), the country’s largest commercial lender, China CITIC Bank and Minsheng Bank – in addition to debit cards.

Swatch unveiled its first-generation of watches with payment functions in October 2015, also in partnership with Unionpay, China’s dominant currency-clearing company and credit-card issuer.

Nick Hayek, chief executive of Swatch, told South China Morning Post the watch company has now simplified the activation process, the main barrier for the first-generation of watches gaining market share.

He added the company was adding the latest payment function to its wrist watches, rather than embarking on an all-new aggressive go-digital strategy, to attract younger Chinese consumers.

“We want to stay in the watches business, not enter the consumer electronics business,” he said.

“We have a different strategy than consumer electronics businesses. We offer a watch first and foremost, and have added a simple function to it.”

The new generation of watches adds to its previous “Swatch Bellamy” collection, and will be modestly priced at around 580 yuan (US$85) a piece.

They will use near-field communication (NFC) technology to enable payment via the watch, instead of a credit card, which uses high-frequency radio waves to register transactions placed in close proximity to a point of sales terminal.

Unlike Apple Pay under which transactions are conducted through an online payment process, the Swatch Pay system – based on the Quickpass technology by UnionPay, the mainland’s dominant bank card clearing business – is workable even when the watch has run out of battery while no wireless connection is needed.

“The watch is a second credit card,” Hayek said. “We want to expand the model to everywhere in the world.”

Technically, it is a Bellamy watch embedded with a bank card chip that uses NFC technology to enable a contactless payment.

Swatch was the first global watchmaker to create a contactless payment system in partnership with UnionPay and China’s Bank of Communications (BoCom) at the end of 2015.

At the time, only BoCom’s debit card was put in operation using the system.

Chinese mainlanders have embraced mobile payment methods, completing transactions worth 38 trillion \yuan (US$5.62 trillion) via mobile devices, ranging from smartphones to wearable devices in 2016 – nearly triple the amount a year earlier.

“This trend for soaring mobile payment will definitely continue,” said Zhou Yuedong, a vice president of ICBC’s credit card division.

“Obviously, young people who have a penchant for mobile payments are emerging to be the major drivers for China’s consumer market.”

The growing penetration of internet and mobile technologies has largely redrawn the mainland’s commercial landscape with mobile payments becoming one of the brightest parts of the new digitalised era.

Smartphones and wearable devices are also increasingly embracing digital health, online gaming, video streaming and social media.

Hayek denied, however, the company was set to jump on the bandwagon of going fully digital, predicting that few digital technologies can be married with a watch, which many customers simply still view as pieces of jewellery, or functional accessories.

The CEO forecasts sales of 150,000 to 250,000 Bellamy timepieces (with the payment function) over the next two years, but models will also be available without it.

Swatch, which owns a wide range of brands including Omega, Tissot, Longines and well as its namesake model, has posted average 15 per cent annualised sales growth in China in recent years.

“Other global credit card companies are no less than sleeping giants,” Hayek said.

“UnionPay understood our model and worked with us to expand both our businesses.”