The Case For And Against Wearable Devices In Financial Services

A new report predicts wearable mobile banking sessions to hit 100 million by 2020. Are wearable devices designed for that level of adoption?

Remember back when mobile was the next big thing? Those were the days.

Today, mobile is here in full force. A recent Juniper Research report expects the number of people using smartphones and other mobile devices to access bank accounts to hit 1 billion by the end of the year.

What’s next?

The same Juniper report predicts the wearables (such as smartwatches and other devices) will account for 100 million mobile banking sessions by 2020. Can that be right?

Here’s Why

The problem with any first run technology is that it is expensive, often prohibitively so. Apple Watch, the leader in smartwatch market share, starts at $350. Some models cost more than $1,000 one could furnish an entire room for less.

But prices have started to fall. Last week, both Best Buy and Target announced $100 price cuts on the base model, selling them for as low as $249. Apple hasn’t come out with an exact reason as to why the cuts were made, but speculation, as it does, runs rampant: Is Apple acknowledging $350 as overpriced? Have competitors, such as Google and Samsung, forced the move? Is this simply a way to boost sales? Or maybe is this a way for the tech giant to clear out inventory for the newest model set to drop in March?

Whatever the reason, cost cuts may lead to higher adoption rates. In November, Forbes reported that Apple Watch had sold seven million units in the seven months since its April 2014 release, and is expected to reach near 70% of the smartwatch market by the end of the year. Price drops should only improve those figures. And the more watches that are sold, the more potential consumers for a credit union’s wearable app.

As the cost continues to decline it’s quite possible that many banking customers and credit union members would start to interact more with wearables in the years to come, says Puneet Malhotra, senior vice president of sales and business development for VSoft Corp., a provider of banking and payment solutions to financial institutions. As of September 2015, its IRIS banking platform is available on the Apple Watch.

Wearable devices also provide users a level of convenience that a mobile phone cannot. These devices can reduce the friction it takes to complete basic transactions, the kinds of transactions most people do on a mobile phone: checking account balances and transaction histories, or managing alerts.

According to Robb Gaynor, chief product officer for Malauzai Software, an Austin-based software developer which currently provides wearable banking to two credit unions, 70% of mobile sessions are limited to viewings of account balance and transaction history, for an average visit of approximately one minute and 10 seconds. Wearables are well suited to this task.

That is exactly the use case that smartwatches are built for because they are quick and easy, Gaynor says. I want to turn my watch over, press a button, and see my balance. I can do that in seconds.

Here’s Why Not

As it rolled the product out, Malauzai saw three practical limitations with banking on a wearable device. One, it’s harder to log in. Keying in a password can be difficult and biometric login is a still evolving bit of functionality.

The second, individuals aren’t accustomed to use their watch. Watches, historically, have been glanced at.

What we learned was that it’s not a place to do something complicated, Gaynor says. You would go there to do something really quick. I think that the practicality of the watch is going to dictate how complex banking applications are going to get.

The third is battery life. Right now, smartwatches require the presence of a phone in order to work. In effect, they route emails, texts, and calls from a phone to the watch. If that’s the case, and smartwatches absorb a cell phone’s ability to make and receive calls, battery life will suffer. And what’s the use of a device that must be charged every five minutes? Gaynor predicts that to change. In the near future, smartwatches may no longer require a smartphone tether.

As more functionalities become available VSoft’s Malhotra says funds transfers, credit card account balances, and payments will be available in 2016 the question becomes more than simply how to make it convenient, but how to make it valuable?

Device Agnostic

The future, Malhotra and Gaynor both point out, lies in creating banking applications that are device agnostic.

There are many credit unions today with fragmented banking applications, Malhotra says. In the early 2000s these credit unions adopted an online banking platform. But as smartphones became more popular, and the need for mobile banking applications arose, credit unions chose mobile providers different than those used for online.

These credit unions don’t have two platforms that look alike or function alike, the VSoft executive says. In some extreme cases members have to use different IDs to authenticate each.

Going device agnostic creates a standard banking experience across all platforms on which members choose to bank. That could be desktop, tablet, mobile, wearable, or, soon, television. For developers like VSoft and Malauzai this means creating applications for an increasing suite of devices.

This is really about is an experience across devices. If members want to come in on a TV, a watch, desktop, mobile phone, tablet, it doesn’t matter to us anymore, Gaynor says. It’s no longer: Is online banking growing? Is mobile banking growing? You need to look at it collectively. They are just a member, and so we build across those platforms.

December 16, 2015

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