The ability to make payments via wearable devices using mobile wallets such as Apple Pay – and, potentially, Samsung’s own offering announced this week at Mobile World Congress – means banks can play a greater role in financial management and purchasing decisions.
“Wearables are going to be part of the future of banking, and not too long from now,” says Clayton Locke, chief technology officer of Intelligent Environments, a British firm which built one of the first banking apps for the popular Pebble smartwatch.
“It is about making banking and payments more convenient for the user. It won’t be for everyone, but there will be enough people out there who will be wearing an Apple Watch that will want to have their financial information on their wrist.”
The hype around the technology may not have translated into sales so far – just 720,000 Android Wear watches were shipped during 2014. However, industry watchers predict the imminent launch of Apple Watch will spur wider adoption, with some estimates that more than 40 million smart devices will ship in total during 2015.
Early trials – Google Glass, Oculus Rift and smartwatches
Despite the technology being in its infancy, a diverse range of applications and services are already being created by banks across the world. However, most of the wearables development coming out of banks’ innovation labs have been experimental, as much a marketing tool as a viable customer proposition.
A number of lenders, such as Spain’s La Caixa and Banco Sabadell, have trialled apps for Google’s on-hold Glass project – providing augmented reality branch location, for instance. At the more future-gazing end of the spectrum, Wells Fargo has toyed with more exotic virtual reality proof-of-concepts using Oculus Rift.
Other innovations have included the use of wearables for authentication purposes with the Royal Bank of Canada’s partnership with startup Nymi, trialling its heartbeat monitoring wristband to authenticate contactless payments. The new Apple Watch is also expected to have similar biometric authentication, which should allay some customer fears around security.
Early incarnations of smartwatch banking apps that have been launched to customers – such as those from Nationwide, Australia’s St George’s Bank and Canada’s ScotiaBank – have tended to be aimed at more simple actions such as checking account balances.
Most of these wearable apps build on the existing functionality of mobile banking apps, aimed at creating a more efficient method of interaction and authentication.
“It is really about thinking about quick glance-able moments and what it is that customers might be looking for at that particular moment,” says Oliwia Berdak, Forrester Research analyst for European consumer financial services sector.
Nationwide’s Android Wear app, for instance, is essentially an extension to its mobile app, allowing users to access the building society’s Quick Balance feature from their wrist, either by scrolling through to the app or speaking into the device, as well as the ability to move small amounts of money between a user’s accounts.
Banks Should Start Developing
Despite the growing interest in wearables – with a host of new devices being announced at Mobile World Congress this week – doubts remain over how widely the technology will be adopted. This is leading to many banks taking a ‘wait and see’ approach to developing and launching services.
Battery life and connectivity remain significant challenges, for example, while device makers are yet to convince sceptics that they can shed the geeky image and persuade the average consumer to don the technology on a daily basis. This means that few believe that wearables will have the same stellar growth as mobile devices – which quickly became popular for bank customers
However, Berdak says that banks that are unconvinced by the current crop of wearable devices will still benefit from creating low-cost prototypes however, trialling a few technologies and preparing for when adoption surges.
“Banks would be silly not to try and engage with this technology early on,” she says. “They do not have to have final apps already launched in the marketplace, but they definitely should be thinking about what they want to do in this space, building some proof-of-concepts and creating some early stage plans.”
This is not only because of an expectation that customer adoption will pick up, she says, but also because banks will often need to build up a skill base – such as gathering expertise in more modern programming languages – as well as getting the right teams and developing best practices. This can build experience in creating a range of digital propositions.
It can also help to partner with third-party companies. For Nationwide, this meant working with global services provider IBM at one of its Innovation Centres to quickly build the app.
However, collaboration with smaller fintech startups could also benefit users, providing a shortcut to accessing the skills that can take time to develop in-house.
Another consideration for banks is around security. Although there is the potential benefit around the use of biometrics for more accurate authentication, recent PwC survey showed that 82 per cent of respondents were worried about the security of these new devices.