By Andrew Barnett
As wearable devices enter the mainstream, they are impacting the day-to-day habits of consumers and bringing potentially significant long-term implications for financial services. More than 80 percent of today’s wearables are worn on the wrist, meaning they are easily accessible and prominently visible to users, traits that make these devices well suited for the delivery of banking information and alerts, as well as conducting transactions.
IDC forecasts that worldwide shipments of wearables will jump 133 percent this year, while smart wearables, those capable of running third-party applications, could see an increase of 510 percent.
Despite this rapid growth, it doesn’t make sense for most financial institutions 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 as an information channel
Currently, the primary financial services use for wearables is alerting. Financial institutions will want to enable the delivery of alerts to wearable devices, but should take into account that, because most of these devices are worn on the wrist, alerts sent to them have the potential to be quite disruptive. This means it is more important than ever to make sure alerts sent to members are targeted so they are seen as helpful, rather than annoying.
Due to their small size it is very difficult to input information through the screen of a wearable, which is why getting the user experience right is critical. For this reason, 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 in order 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.
Wearables as a mobile payments driver
Financial institutions should also be mindful of wearables’ ability to influence and drive mobile payment adoption. Not only do they provide users with an additional device through which they can make mobile payments, they can also enhance convenience and help address security concerns.
One of the factors inhibiting adoption of mobile payments today is the lack of added value to users. Mobile devices offer a different way to make a payment, but if it is not significantly easier, quicker or more secure than swiping a card, consumers have little incentive to change their current behavior.
Paying via wearables, while just as easy as swiping or inserting a credit card, can provide that “added value” as a more secure alternative. Tethering a wearable to a smartphone or using geolocation capabilities 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.
While most discussion around mobile payment in the industry is focused on payments at the point of sale, wearables could drive mobile payments of all kinds due to the compact nature of the devices and ability to deliver quick, simple messages. Alerts that notify users that their balance is low or a bill is due often spur transactions, presenting the opportunity to motivate a wider variety of mobile payments.
Wearable devices present a new opportunity for financial institutions to connect with their members and enable them to easily conduct important financial transactions during their day-to-day life. These devices have significant implications for the way banking information is delivered and the way transactions are conducted, and with adoption predicted to grow, now is the time to work wearables into your financial institution’s overall mobile banking and payments strategy.
Andrew Barnett is the principal digital banking consultant for Fiserv, Brookfield, Wis. Email: [email protected].
