By Andrew Barnett, Fiserv
As wearable technology becomes more commonplace, it’s becoming an integral part of how people live their lives, from how they exercise, to how they drive, to how they bank. Given the potential of wearable devices to deliver banking information and alerts as well as enable transactions, it is a worthwhile endeavor for financial institutions to evaluate the role wearable technology can play in an overall mobile banking and payments strategy.
Creating dedicated wearable apps might be a tempting place to start, yet financial institutions should carefully consider if this is the right approach due to the significant investment in time and resources that are required. A more practical choice for the majority of financial institutions may be to make a start by extending the existing functionality and convenience of the mobile channel to wearables – by enabling existing alerts to be delivered to these devices, for example.
To better understand the potential of wearables for financial services, one must consider the unique attributes of the devices. Notably, more than 80 percent of today’s wearables are worn on the wrist. An example of such a device is Apple Watch, which offers broad functionality, allowing users to check e-mail, load a boarding pass or even monitor an account balance.
Due to their small size it is very difficult to input information through the screen of a smartwatch, which is why functionality delivered via wearables should focus on quick and simple actions. This makes wearables an ideal conduit for actionable alerts. Actionable alerts enable the recipient to reply to trigger an action, such as replying “pay” in response to a bill notification alert. This eliminates the need to input information on a tiny device and makes transactions from wearables much more practical. Voice commands are another way to make transactions from a small wearable more practical, although users have shown hesitation at voicing commands related to financial transactions in public settings.
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Taking it all into account, it’s clear that financial institutions will want to evaluate enabling the delivery of alerts to wearable devices, but since most of these devices are worn on the wrist, alerts sent to them have the potential to be quite disruptive. This means it is especially important to make sure alerts sent to users are targeted and personalized so they are seen as helpful rather than annoying.
Wearables also have potential to enhance the security of mobile transactions by using the device’s proximity to a specific mobile phone as a second form of authentication. For example, when a transaction is made at the point of sale, geolocation can ensure the wearable device from which a payment is being made is in the same location as the owner’s mobile phone. If both are present then it is less likely that the device from which the payment is being initiated is stolen.
Regardless of the industry, the functionality of wearables is currently restricted due to their short battery life and the fact that most must be tethered to a phone. However, these limitations are gradually being addressed with the development of some wearables that feature 3G connectivity allowing wearable devices to be used independent of a phone. This will make wearables more useful in situations in which the user is less likely to have their phone with them, such as when out on a run.
Just as many individuals now access banking information on their smartphones, we expect the mainstream adoption of wearables to result in similar usage. In addition, wearables have the potential to drive incremental usage of mobile payments. The more mobile-payment-enabled devices a consumer owns, and the more convenient they are, the more likely that consumer is to actually make a mobile payment.
Based on the predicted growth and expanded functionality of wearables, we can expect that considering wearable technology as part of the mobile strategy will become an important consideration for banks in the near future.