Are fintech wearables poised to become a leader in the wearables arena?
Smartwatches, fitness wristbands, and other wearable devices are the cutting edge of mobile technology, combining useful applications and efficient, user-friendly operations with contemporary style. Despite the fact that wearable technology is still in the earliest stages, the financial industry has been eager to embrace it as part of its digital strategy.
According to recent studies, 15 percent of banks already have or are currently rolling out wearable apps, and 72 percent have wearables on their roadmap for the next three years. The most common reason given for this enthusiastic interest is the desire for proximity payment capabilities, with 66 percent of respondents naming this as the most attractive advantage.
One of the most obvious benefits of adopting wearable technology is the opportunity for financial service firms to expand mobile payments and account management capabilities. But that’s only scratching the surface when it comes to the advantages that fintech wearables will impact in the future.
As wearables continue to grow in popularity, consumers are looking for ways to further integrate them into their lives. This is especially true for people 35 and under, a group that, having grown up with it, is experienced — and discerning — when it comes to mobile technology. Unfortunately, research conducted by the Millennial Disruption Index revealed that financial service firms have some work to do with this demographic.
The main issue seems to be a lack of innovation and differentiation, with over half of the millennials polled feeling that there was little difference in the products and services their own bank offered and the offerings of other banks. Seventy percent reported being much more keen on companies such as Apple and Google, leaders of the wearable technology revolution. This dichotomy points to an important need that’s not being adequately met by traditional financial services, and one-third of younger customers are seriously considering leaving their current financial service provider. To maintain customer satisfaction and loyalty, firms will have to integrate wearable technology into their standard services.
Another major area of discontent is the limitations that are inherent in wearable tech. The necessarily small screen and lack of a keyboard can make it difficult to perform tasks that require inputting or searching through data. As a result, current applications are somewhat restricted in their scope, with only the simplest transactions being available. However, recent advances in voice-activated technology are making huge strides in this regard, and this issue could very well be eliminated in the space of a few years. Financial firms that create user-friendly, hands-free applications will score big points with consumers.
Yet, even with the challenges facing fintech wearables, Visa is moving forward with the technology. Visa recently announced that they’re expanding the Visa Ready program to include IoT companies like Fit Pay and Samsung.
What the Future Holds
One of the most significant gains that fintech wearables produces is the ability to collect and leverage big data more effectively. With information about the wearer’s location, activities and even biometrics being gathered automatically, financial services firms can develop better offerings for their customers.
These can take the form of highly relevant account alerts and offers, as well as contextual services. For example, future fintech wearables will be able to measure behaviors, such as the time of day customers tend to spend money and where they spend it. Organizations can then send timely, pertinent offers and other marketing notifications. Wearable devices will also have the ability to detect when a consumer is inside a store they often visit and have the method of payment they most commonly use in that establishment already queued up when it’s time to check out.
There are even specific benefits for different sectors within the financial industry. Insurance companies, for instance, can collect accurate data about a customer’s activity level, weight, blood pressure, location and other health- and lifestyle-related information, allowing them to develop more personalized, comprehensive policies and services.
Security Challenges and Solutions
These impending advances are inspiring, but they do raise some considerable concerns regarding the safety of sensitive financial data. The convenience of wrist-wave payments can make it too easy for unauthorized use if the device is lost or stolen, and the expansive amount of personal data that is collected represents a goldmine to identity thieves. Fortunately, innovations are being made to counteract these threats.
The first line of defense is within the devices themselves. GPS technology is being coupled with biometric-based personal identifiers such as a consumer’s fingerprints, voice, heart rate and other individual signatures to make it nearly impossible for anyone but the rightful user to make payments or access information. These measures can offer even more security than passwords, PINs and signatures and could become standard forms of identification in the future.
The methods that are being used to encrypt the data collected by wearable fintech are also changing. Cryptosecurity organizations such as the FIDO Alliance are developing new authentication processes for password-less security options like voice and fingerprint verification. They revise these protocols regularly to stay ahead of phishers and hackers.
The ways people stay connected are evolving, and financial organizations must adapt accordingly to survive and thrive. Wearables are going to play a large part in the future of mobile devices, and fintech is poised to lead in this arena. Firms that develop the most effective wearable applications can establish prominence now and into the future.