by Kirk Douglas
From Android Wear devices to the Apple Watch, the most notable of names have the risk-taking startups before them to thank for opening a door to a new frontier in consumer technology.
Arguably, just as some of those start-ups have paved the way for big brands to come through the wearable market (guns-blazing might I add), there is bit of thanks trailblazers owe to the mobile handset market as well. Without our modern smartphone wireless technologies, the app-centric use habits users have become accustomed to and our increased reliability on mobile tech, a standalone wearable might be intrinsically weak by today’s standards.
Smart phones have become portable hubs for the wireless headphones and connected devices we attach to them. The advent of better Bluetooth technology, tiny long-lasting batteries and robust apps have kept the growing market of wearable devices evergreen to say the least. Consumers like myself and perhaps some of you, now look to our devices for insight in the areas of health and fitness; areas companies like Fitbit have had their feet firmly planted in since their inception.
Fitbit and the wearable market
Fitbit, a pioneer offering a plethora of health and fitness wearables has had some incredible staying power as market leader in the consumer segment by volume since launching their first product in late 2009. As of February earlier this year, Market Research firm IDC reported a staggering 29.5% market share for the company, even as Apple’s growth has taken it to the number two spot with a healthy 15% just a year or so since the introduction of the Apple Watch. The top five on their list was rounded out by Chinese manufacturer, Xiaomi, followed by Samsung and finally Garmin. Each taking a respective slice under 10%.
Having been in the market far longer than the other four of the top five, there is something notable about Fitbit’s market position. While many other manufacturers have focused on flashy designs and integrating GPS and communications tools, Fitbit has mostly kept their product focus around their intent to help users track fitness. They make products that encourage activity, help users reach fitness goals and share their progress with friends. To do this, they have relied heavily on a web interface that communicates between their iOS and Android app offerings, leveraging the power of the cloud to store user data. They have also decidedly created a bit of a “walled garden” to keep data out of other reservoirs, denying integration of tools such as Apple’s HealthKit and keeping their user data to themselves.
As Apple and Android Wear devices such as the Samsung Galaxy Gear S2 slowly encroach on the everyday consumer market, Fitbit must retain its strengths and stay apart from the crowd to differentiate and keep new users buying their products. Luckily, Fitbit has always had an attractive portfolio of options, particularly for the price conscious or new fitness tech entrant, with devices currently starting as low as $59.00.
Resting on their laurels however, isn’t likely to bring them long-term growth or build the company any loyalty. Inevitably, adding new and competitive products to their portfolio, like the recent Fitbit Blaze and announcing new features will be necessary to keep them agile in a market that is becoming increasingly crowded.
Understanding the acquisition of Coin
In a surprise announcement Wednesday May 18th, Fitbit announced their acquisition of Coin with a deal that ‘includes key personnel and intellectual property specific to Coin’s wearables payment platform’.
To understand what this deal means for Fitbit, it is important to look at who Coin is and what their offerings might mean for the future of the wearables giant.
Coin, a startup company launched via Kickstarter in 2013, started with an ambitious product idea of letting users carry around one card to rule them all. The technology they employed in their Coin 1.0 card system was based around the MSD (Magnetic Stripe) standard inherent in credit and debit cards going back decades prior. On the cusp of new emerging technologies such as NFC, Coin proposed a product where users could ‘sync’ banking and credit card data to just one of their Coin cards and choose between payment methods on a whim while making a purchase.
The Coin 1.0 card used the magnetic stripe which was ‘re-written’ on the fly, upon the user selecting a method of payment. The release of their first card was hampered by long wait times with some Kickstarter backers waiting months or up to a year to receive their first card. Among other complaints was the common pitfall of retailers either not accepting the card or the card not working in places such as ATM machines or gas stations.
As Coin was a product with which I was interested, I spent a lot of time online following the news stories about it and reading reviews. I recall many accounts on forums such as Reddit where users took to the internet to express their frustrations with the device’s shortcomings.
The technology was sound in theory, but just didn’t seem to be executed quite right for a fluid user experience. Not long after, Apple introduced Apple Pay, Google introduced Android Pay and Samsung introduced Samsung Pay, making Coin merely a blip on the rear-view radar of up and coming payment methods.
Since then, Coin has announced Coin 2.0 with a card that is 8% thinner, the ability to add loyalty cards and more importantly, be read by Chip & Pin (or EMV) readers as well as those which are NFC enabled for tap and pay
Upon news of the acquisition, Coin has subsequently posted to its blog the discontinuation of its product lineup and a thank you to its customers.
A Rough Road Ahead
Deciphering the Fitbit press release around the Coin acquisition is a curious task. In the wording, (highlighted above) there are two things which stand out to me.
The first is the part I mentioned earlier, ‘..specific to Coins wearables payment platform.’
As a close follower of Coins’ public presence, I wasn’t ever aware of a wearable product they announced and I am not so sure I would consider a credit card a “wearable” in the sense that I think of a fitness band or a smart watch.
Second, ‘…the acquisition excludes smart payment products, such as Coin 2.0.’
Knowing what we know now about coin 2.0’s added offerings in chip & pin and NFC, what is left to take?
Of course, it is purely speculative to make any guess with accuracy but I would put my money on any patents and the great minds who worked on the project. There also may have been some untapped capability in the Coin 1.0 tech that wasn’t public or some aspects of the Coin 2.0 technology left out, rather than all of it. Or perhaps this just boils down to Fitbit taking the technology assets and forgoing the idea of any physical card related tech in particular. Fitbit surely has a plan and think they know the value in whatever they have acquired in taking up Coin’s people and intellectual property.
The more obvious statement likely to be true is that the assets they’ve acquired –whether tech or people, or both – will stand to ‘accelerate Fitbit’s ability to develop an active NFC payment solution that could be embedded into future Fitbit devices.’
There are no mincing words in that statement. Fitbit is clearly gearing up to be the next way to pay on the wrist of consumers. The question then becomes whether or not they have the market share and relevance necessary to make a payment platform on their devices successful.
As Google and Apple among others, move fast into the wearable space leveraging their own payment methods (already available), and doing so with attractive products to adorn the wrist, it is too early to tell what the future holds for Fitbit. Surely they will need to be competitive regardless. Attractive pricing will no doubt require attractive technology both aesthetically and in terms of feature set so that they don’t fall behind.