Digital payments using wearable devices such as smart watches, fitness trackers, and payment wristbands are set to soar from $3.1bn in 2015 to $501.1bn worldwide by 2020, a new report suggests.

The research by market intelligence firm Tractica also anticipates that in five years’ time, wearable payments will represent around 20% of the total mobile proximity transaction volume and about 1% of total cashless transactions in retail.

Wearable payment systems may utilise near field communication (NFC), radio frequency identification (RFID), or quick response (QR) codes and barcodes as enabling technologies.

The contactless point of sale (POS) terminals and back-end payment processing infrastructure being utilised for mobile payments are also being leveraged to extend payment capabilities to wearables as well.

"Wearable payments are just getting started," says research director Aditya Kaul. "Apple Pay for the Apple Watch is the first big effort at enabling payments with the wrist. Soon to be launched, Android Pay and Samsung Pay are other prominent digital wallet solutions that will support smart watch payments.

"Key early market initiatives include trials and deployments of Barclays’ bPay system in the United Kingdom, Swatch’s partnership with UnionPay to enable wearable payments, Alipay’s partnership with Xiaomi in China, and Disney’s successful deployment of its MagicBand closed-loop payment and ticketing system at its theme parks, among others."