Mastercard Inc. MA along with MatchMove, a Singapore-based Banking-as-a-Service provider, and Tappy Technologies, a world leading wearable payment integrator, is bringing tokenization into a small, flexible chip.

This chip can be used in a range of battery-less wearables and accessories, such as watchstraps or keyrings. These devices can then be used for making contactless payments.

Cardholders of MatchMove can add their Mastercard branded cards to this payment chip by simply placing the wearable or the accessory on a Bluetooth-connected device developed by Tappy Technologies. Mastercard will use its Mastercard’s Digital Enablement Service (MDES), which will tokenize the MatchMove Mastercard into the secure payment chip of a wearable via the Bluetooth device. This wearable device can be used at any contactless acceptance terminal and is compatible with any contactless card or digital wallet.

Mastercard’s tokenization technology is the industry-leading security standard in electronic payments. Via this technology, cardholder information, such as account numbers and expiration dates are replaced with a unique digital identifier (a token) that can be used for payment without exposing a cardholder’s more sensitive account details. Tokenization hides consumers’ confidential account information during digital transactions, making digital payments more secure for everyone, everywhere.

The integration with Tappy technologies comes at just the opportune time when people are increasingly turning toward digital and contactless modes of payments. Per a Mastercard global 2020 study, 91% of respondents in the Asia Pacific were found using tap-and-go payments facility while 75% confirmed that they would continue using contactless methods even after the pandemic subsides due to concerns about safety.

Mastercard’s tokenization technology embedded into wearable is an absolute game changer for the banking industry. The use of wearable as a payment device is fast gaining momentum among the younger lot given that it eases the payment making process while retaining its fashion appeal.

The company’s constant innovation on the technological front is highly commendable. Technologies that securely and seamlessly integrate payments into people’s day-to-day lives are rapidly spurring user demand and higher adoption. Mastercard rightfully perceives the growing need for contactless solutions. According to a Pew Research Center study published on CNBC, nearly one third of the adults say that they make almost no cash purchases during a week but go for contactless applications. Precisely, millennials are more comfortable using the contactless channels of payments.

Also, the wearable payment market is slated for a steep rise. Going by the report published by Allied Market Research, the global wearable payments market was estimated at $285.47 billion in 2019 and is expected to hit $1.37 trillion by 2027, registering a CAGR of 21.7% from 2020 to 2027. Further, the report suggests that the key catalysts for this demand are increase in the uptake of cashless payment services across the world, better customer experience offered by the wearable payment mediums, surge in demand for wearable devices and the contactless payment modes for secure and safer payment transactions.

Another company Visa Inc. V is also providing a contactless payment option to its customers and on that front, it recently announced that its Tap to Phone product will now be available in more than 15 markets with plans to expand to the United States and the rest of the world. The Tap to Phone program enables sellers to turn their near field communication enabled mobile devices into contactless POS terminals with no additional hardware required.

In six months’ time, the Mastercard stock has rallied 7.1% compared with its industry’s growth of 2%. Other players in the same space, namely American Express Co. AXP and Discover Financial Services DFS have also gained 50.5% and 14.8%, respectively.

Mastercard carries a Zacks Rank #4 (Sell), currently.

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