As banks and credit unions decide whether to support wearables, it is important to analyze the market and build a game plan for success.
The official inauguration of Apple Watch brings great expectations inclusive of changing the way we think about how to gather data and turn it into information. Until now, achieving information gathering meant entering information via keyboard, voice or video. Now, we are embarking on a world of ‘sensor data’ and it suits consumers.
More and more, bank and credit union customers prefer to bank wherever they are, using their smartphones, tablets or wearables as the remote control for their financial management. If consumers are using mobile-connected devices to streamline their to-dos, then what is next for these tiny, mobile computers? Proving their continued benefit for banks and financial institutions.
For example, the Apple Watch puts sensors into the wrist of every user – stockbrokers will overlay their heart rate data on top of their trade data.
This sensor gathered information, when combined with time and geography will add another dimension to our decision making process and by investing and rolling out wearable-centric functions, banks can reduce marketing costs, satiate customers’ expectations and gain enormous publicity. Some of the early services rolled out by banks includes alerts and notifications about bank balances and frauds on smart watches.
However, the challenges for widespread wearable adoption in banking are much more complex.
While banks are one of the biggest holders of consumer data, which plays well in the wearables game, innovation has been a slow process due to stringent compliance factor and ensuring the security of customer and investor data. We’ve seen wrist wearables take the lead over ear-based wearables in the fitness sector. However, would this ring true in the financial environment, where users may prefer the hands-free advantages of accessing their bank balance on their wearable while talking on the phone?
Many claim the Apple Watch will be the driving force for the growing popularity of wearables. According to Canalys, the 720K Android Wear devices shipped in 2014 was a fraction of the 4.6 million smart wearable bands sold. Still, a few forward-thinking banking organizations have started tech trials for particular wearable devices and may be ahead of the curve:
Before jumping into wearables, banks can experiment on a smaller scale to identify and evaluate wearable banking concepts ahead of making a large investment. As banks and financial institutions examine and identify wearable concepts, leaders should keep the following in mind to identify lasting wearables concepts:
- Analyze market fitment: This involves understanding the characteristics of wearables as a channel in comparison to traditional channels, while keeping in mind the banks’ go-to-market strategies. Take this time to compare and identify differentiators and similarities between wearables and the traditional digital channels or devices already offered in the market. By doing so, you are building a strong understanding of wearables’ path to maturity and what may be missing to spark more widespread acceptance of the technology in the long-term.
- Shortlist preferred wearable platforms: Categorize wearable concepts from other industries, analyzing bank fitment and identifying products. Pick from a pool of success stories, innovative concepts and failure/setbacks from different industries and geographies. Using a spectrum of the following attributes like key features offered, industry, target consumer profile, wearable used, or complexity of implementation, you can narrow it down to a short list of what fits into your infrastructure.
- Identify concepts for financial institutions: Once you’ve completed the first two steps, the process of elimination is done for you. You can deviate from the categories of wearables that do not serve the overall benefits and concepts that would establish success for wearables in banking.
Before saying no to wearables, the leaders of financial institutions are better off giving them the consideration they merit. While this process is a not a painless one, ultimately wearables will serve industries on a new level of unification. The wearable devices makes the operation more convenient and effective as they are hands free and allow the user to multi-task with phone and the wearable simultaneously. Going through this process, while time consuming, establishes the building blocks for innovative digital banking concepts for next-gen channels.
Unlike previous technology revolutions like smartphones or tablets, wearables include a long list of disparate product types such from digital wrist computers to digital tattoos, which bear only a superficial resemblance to one another. Such a wide range ensures the creators of wearables within banking and insurance can deliver a differentiated experience for the end consumer. Imagine going as far as accessing biometric information from a wearable and using it to design new solutions to solve business problems.
As customers unbox their first sets of Apple Watch gadgets, banks and other industries will be listening to the feedback of early adopters. Meanwhile, they will continue researching how wearables within banking and insurance can deliver a differentiated experience for the consumer, simplifying banking, and adding value where traditional channels fail.
Projected Wearable Usage
While it is very difficult to determine growth for new technologies, estimates were made as part of the BI Intelligence Wearable Market Report. Here are some of the expectations.
- Wearables are expected to see significant growth: We estimate the global wearables market will grow at a compound annual rate of 35% over the next five years, reaching 148 million units shipped annually in 2019, up from 33 million units shipped this year.
- The smartwatch will be the leading product category and take an increasingly large share of wearable shipments: We estimate smartwatch shipments will rise by a compound annual rate of 41% over the next five years. Smartwatches will account for 59% of total wearable device shipments in 2015, and that share will expand to just over 70% of shipments by 2019.
- The Apple Watch will kick-start growth in the overall smart watch market: The Apple Watch will account for 40% of smartwatch shipments in 2015 and reach a peak 48% share in 2017.
- Fitness bands and miscellaneous wearable device types, like smart eyewear, will continue to cater to niche audiences: Fitness bands, because of their appeal to niche audiences interested in health and exercise, will see their share of the wearable device market contract to a 20% share in 2019, down from 36% this year. There will be some blur between fitness bands and smartwatches.
- Now that both Apple and Google are in the smartwatch market, they will dominate, much as they have in the smartphone and tablet markets: Because these platforms make up over 90% of the entire mobile platform market, many mobile users interested in wearable devices will gravitate toward Apple Watches and Android Wear-based devices.
- Barriers still persist, and these will inhibit consumer wearables adoption and usage: Smartwatches in particular must become standalone computing devices with more robust functionality for the devices to become mainstream. Other barriers include small screen size, clunky style, limited battery life, and lack of a “killer app” that can drive adoption.