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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 makes sense for credit unions to be aware of developments in this space and the role wearables might have in an overall mobile banking and payments strategy.
IDC forecasts that worldwide shipments of wearables will jump 133 percent this year, with the volume of wearables capable of running third-party applications, known as “smart wearables,” projected to grow an astounding 510 percent. As acceptance of these devices continues and market supply increases, the price of the technology is expected to decrease, leading to further adoption and usage.
Despite this rapid growth, it doesn’t make sense for most 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 credit unions 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 percent of today’s wearables are worn on the wrist. Health trackers like Fitbit are changing the way we measure our health and stay fit. Such smart wearables as the Apple Watch offer broader functionality, allowing users to check email, load a boarding pass or even monitor an account balance.
Currently, the primary financial services use case for wearables is alerting. Credit unions will want to enable the delivery of alerts to wearable devices, but they need to take into account that most of these devices are worn on the wrist, so 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, which enable the recipient to reply 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, making transactions from wearables much more practical. Voice commands are another way to make transactions from a small wearable easier, although users have shown hesitation at voicing commands related to financial transactions in public settings.
Wearables also have the potential to help credit unions enhance the security of mobile transactions by leveraging 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, such capabilities as proximity payments (where the device must be near the pay station) and geolocation 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, it is less likely that the device from which the payment is being initiated is stolen.
Today, the functionality of wearables is limited due to their short battery life and the fact that most must be tethered to a phone. However, these limitations are being addressed with some wearables, such as the Samsung Gear S, through 3G connectivity that allows the devices to be used independent of a phone. This will make wearables more useful in situations in which the user is less likely to have their phone with them or turned on, such as at a party.
Fiserv research shows that advanced mobile functionality leads to more satisfied users, meaning a mobile strategy that includes wearables has positive member retention implications. With growth and expanded functionality on the horizon, now is the time to work wearables into your credit union’s overall mobile banking and payments strategy.
Andrew Barnett is senior mobile solutions consultant at CUES Supplier member Fiserv, Brookfield, Wis.
