By Andrew Barnett
Wearable devices are entering the mainstream, and with increased adoption and usage come greater implications for financial services.
Given the potential of these connected accessories to deliver banking information and alerts, as well as enable transactions, it's time for financial institutions to consider how wearables fit in their overall mobile banking and payments strategy.
IDC forecasts worldwide shipments of wearables will jump 133% this year, with the volume of wearables capable of running third-party applications, known as smart wearables, growing 510%. As the technology matures, the price of the technology will decrease, leading to further adoption and usage.
Despite this rapid growth, it doesn't make sense for most banks and credit unions to immediately jump in and create dedicated wearable apps, due to the fact that the development of dedicated apps can require a significant investment of time and resources. A more practical choice for the majority of financial institutions is to extend the existing functionality and convenience of the mobile channel to wearables.
Wearables have unique attributes that impact their role in the overall member experience. More than 80% of today's wearables are worn on the wrist. Health trackers such as Fitbit are changing the way we measure healthy behaviors and stay fit. Smart wearables such as the Apple Watch offer broader functionality, allowing consumers to check email, load a boarding pass or monitor an account balance.
Currently, the primary financial services use case for wearables is “alerting.” As most wearables are worn on the wrist, alerts sent to them can be quite disruptive. It is important to make sure alerts are targeted so they are seen as helpful rather than annoying.
Where Wearables Are Ideal...
Due to their small size, it can be difficult to input information through the screen of a wearable, so getting the user experience right is critical. Functionality delivered via wearables should focus on quick and simple actions. This makes wearables an ideal conduit for actionable alerts, enabling the recipient 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.
...And Where They Are Not
Today, wearable functionality is limited due to their short battery life and the fact that most must be tethered to a phone. These limitations are being addressed. The Samsung Gear S, for example, features 4G connectivity that allows it to be used independently of a phone. This makes it more useful in situations where the user is less likely to have a phone, such as when out on a run.
Wearables also have potential to enhance the security of mobile transactions by using the device's proximity to the phone as a second form of authentication. For example, when the transaction is made at the point of sale, proximity payments and geolocation can ensure the wearable is in the same location as the owner's mobile phone. If both are present then it is less likely to be a fraudulent payment.
Fiserv research shows advanced mobile functionality leads to more satisfied users, meaning a mobile strategy that includes wearables has positive retention implications. With growth and expanded functionality on the horizon, now is the time to evaluate the role of wearables in your financial institution's overall mobile banking and payments strategy.
Andrew Barnett is Principal Digital Banking Consultant with Fiserv. This article originally appeared as part of Fiserv’s blog here https://www.fiserv.com/blog/the-point/wearables-mobile-banking-payments-strategy-blog.aspx