This article originally appeared in the Fall 2014 Issue of Consulting Insights.
Wearable tech is generating a lot of buzz on the heels of Apple’s recent Watch announcement, but the truth is, the wearables movement isn’t exactly breaking news. The Pebble smartwatchhas been on the market for years, and Google’s Android Wear has been up and running since mid-2014. The financial services industry has yet to embrace the smartwatch concept, however. While firms like Wells Fargo and Discover have unveiled beta versions of Google Glassware, few major financial institutions have publicly expressed interest in developing products for the budding smartwatch market. To date, Fidelity’s “Watchapp” for Pebble represents the sole smart-watch app released by a major U.S. retail bank or brokerage firm. This may be about to change.
The Apple Effect
Two factors could lead to an increase in smartwatch development by the financial services industry: the app development cycle and the unique opportunities smartwatches offer for personal finance. The first factor is a well-known paradox among app designers. Despite the fact that Android leads in smartphone market share, companies typically first develop new apps for Apple products and treat Android as a secondary concern. Apple products tend to attract a wealthier client base than Android; understandably, many companies target new technology offerings at affluent individuals for maximum potential
returns. The diversity of Android-powered devices relative to the standardized iOS ecosystem also deters firms from development.
Corporate Insight’s Mobile Monitor service has tracked the mobile offerings of leading financial services firms since 2012, and we have regularly observed firms making their first foray into mobile by launching an app for the iPhone, only to release a version for Android at a later date. It’s also common for firms to first introduce new functionality to their iPhone app before rolling out the update for Android. The launch of an Apple-branded smartwatch may be the catalyst needed to spur smartwatch app development by major financial services firms.
Personal Finance Applications
Forward-looking firms should recognize that smartwatches offer potentially valuable opportunities to serve and engage their customers. With a bit of creativity, financial institutions can leverage these devices to help customers gain better control of their finances. Specifically, the smartwatch’s built-in geolocation capabilities and highly-visible position on an individual’s body lend it perfectly to the delivery of time-sensitive, actionable alerts.
Perhaps the most obvious use for a financial smartwatch app is to present core account balance information. Enabling banking customers to easily check their live account balances with a simple glance at their wrist could encourage them to make better purchasing decisions. UK-based Intelligent Environments realized this potential a year ago with a banking app for Pebble focused on helping users monitor their balances.
Meanwhile, allowing brokerage clients to monitor their performance and receive securities alerts directly on their wrist will allow them to quickly notice and respond to market fluctuations. Firms have already recognized the opportunity here and have begun working on prototypes. UK-based True Potential just recently demonstrated an investment smartwatch app at FinnovateFall 2014 that aims to help clients reach their investing goals by making “microinvestments” with funds that they likely would have otherwise wasted on unnecessary purchases.
The smartwatch is also an excellent medium for financial firms to deliver fraud alerts, helping clients minimize damage. Relatedly, firms can bolster their fraud detection services by taking advantage of the smartwatch’s geolocation services. For instance, if a firm receives a transaction request from an IP address in Europe while their smartwatch app detects that the client is currently stateside, they can trigger a fraud alert or security check.
Along with account and fraud alerts, smartwatch apps could incorporate credit and debit card reward offers and discounts. As banks and credit card issuers notify clients about nearby offers and discounts, they can also factor in their budgeting and savings goals. Firms can potentially create a smartwatch app that learns the user’s behavior and utilizes geolocation tracking to help avoid a wasteful purchase (e.g., their 2:00 pm cappuccino) in real-time. While there are numerous smartphone apps geared toward helping clients reduce needless expenditures, the higher visibility of the smartwatch should greatly improve the effectiveness of such services.
The Smartwatch Outlook
While we wouldn’t be surprised if many firms hold off on developing an app for the smartwatch until they see strong adoption rates, if the most optimistic projections prove accurate, those firms will be doing so to their own detriment. Apple’s influence on consumer behavior and the commercial app development cycle is undeniable. Just weeks after Apple announced the pending release of Apple Pay, Capital One launched a new mobile wallet specifically designed for compatibility and integration with the forthcoming payment system. As the launch of the highly-anticipated Apple Watch grows near, we expect banks, brokerages and credit card issuers to release iOS-compatible smartwatch apps, and, eventually, this technology will trickle down to Android.