The number of people using wearable devices like Fitbit or the Apple Watch has doubled in the last couple of years, with 30 million Americans using wearable technology every day. These devices along with smart phones give people a new platform over which to make payments, giving firms a new valuable importunity to generate profit. 500 billion dollars of payments will be made over wearable devices by 2020 according to Tractica, a think tank which studies wearable technologies. A new competition has opened up between Apple, wearable device technology firms like FitBit, banks, and independent developers to gain market share in the increasingly lucrative world mobile payments.        

Fitbit(FIT  ), founded in 2007, currently is the largest single player in the wearable device market, with about a 25% market share. Fitbit makes wearable devices which track physical activity and biometrics like heart rate, the number of calories burned from exercise and even quality of sleep. The company also makes other fitness related devices like scales which display not only weight, but also body mass index, and percentage body fat. Though the technology has proved very popular with some, it faces competition from many similar, cheaper products made by companies from China and also from the much more expensive, but higher end, Apple Watch. After the company's IPO last year, the company's shares have lost 50% of their value. In a bid to add value to their company, Fitbit has purchased a wearable payments platform from Coin, a tech start up that makes wearable payments technology.    

Coin is mobile payments start-up company that makes a digital payment system which combines all of a user's credit cards into one readable plastic card that works with many conventional card readers in stores. Coins technology can even be used at ATMs and users can track the location of their Coin device if they lose it. When it was first launched in 2014 the technology, costing $100, generated a lot of enthusiasm and was able to generate start-up capital from pre-orders alone. To date it has sold over 250,000 units. Recently the company launched a new version of the device, Coin 2.0, which has sold out already. Though popular with some, the technology remains unproven, does not work everywhere, and has relatively small number of users compared to other mobile payment technologies.          

Fitbit believes by introducing Coin mobile payment technology into their device, users will make the choice to make payments using the Fitbit. In addition to the platform Fitbit is purchasing form Coin, Fitbit is also bringing on some key staff over from Coin to help implement the new technology. It is unclear when Fitbits will be able to process mobile payments. If Fitbit can successfully implement this mobile payment technology, the value of the company's shares will doubtless increase. Currently though the company is facing lawsuits from people claiming their technology does not track fitness bio-metrics such as heart rate as accurately as the company say it does These lawsuits combined with the recent news that researches from the California State Polytechnic University found Fitbits highly inaccurate has sent the stock tumbling. In addition to technologies developed by companies like Coin which seek to combine of a user's cards into one, contactless payment technology like Apple Pay are also playing a significant role in the development of changing the way people pay for things. These technologies use a persons Phone, rather than a card, to make payments. Since it was introduced in 2014 Apple Pay has attracted millions of users and has been more successful than many other mobile payment technologies players because its convenience and because many retailers have adopted the technology.   

Apple Pay
Apple Pay

Google's counterpart to Apple Pay, Android Pay, has many of the same features as Apple Pay for users of Android phones. Android Pay's notable advantage over Apple Pay is that it does not require special contactless payment terminals but can work with existing payment terminals. Google is also experimenting with technology in which users simply tell cashiers they are paying with Google and give their initials. The cashier then checks a database which has the user's photo, and Google automatically checks if the user's phone is near a participating merchant to authorize the payment.     

Besides tech companies, traditional banks are also entering the mobile payment market place. The largest bank in the world by market capitalization Wells Fargo (WFC  ) announced that this summer it is adding a mobile payment system to its existing mobile app for Android users. Wells Fargo customers will be able to make payments at all the same locations that accept other mobile payment systems and will also be able to conduct ATM transactions without the need for a physical card. J.P. MorganChase (JPM  ) added a similar feature to its mobile app last year.       

Fitbit also faces the challenge of trying to market their current line of products, some of which will now feature this mobile payment system. Current users use their Fitbits to track their fitness, not to make payments, so it is unclear if consumers will jump onto the Fitbits new payment system. Fitbit has not extensively tested if their consumers will use their new feature. Also Fitbit faces the continuing challenge of marketing its fitness devices as more and more of what the tracking and fitness planning their products offer is being offered for free or at a lower cost. While mobile payments will presumably add value for consumers for Fitbits, its unclear if it will be enough to convince consumers to continue to go out and buy them.

More and more payments are being made online, leading banking and online payments companies to make a push so that their services will be used by smart phone users. Online payment giant PayPal (PYPL  ) launched a new app this year and saw a 54% increase in mobile payments in the first quarter. PayPal also acquired the popular peer-to-peer payment service Venmo. Venmo allows users to transfer money to other users and is commonly used by people to do things like split checks at restaurants or to share a taxi fare. E-payments are being done more and more over smartphones. In addition, disruptive technologies like Apple Pay and Coin will play a greater role in payments in the future. But all of these changes depend on how easy and convenient these technologies are for consumers. Investors should look towards companies that are innovating and are also focused on making the user's experience better than what is already out there.