One of the biggest challenges the FinTech industry faces is attracting and retaining clients. Luckily, advanced technology can turn almost any soft spot into a business strength. This is the case with wearable technology and FinTech. Wearables in the financial sector help stakeholders learn user preferences, fascinate users with new services, and provide unparalleled experiences.
The future of wearables in FinTech depends mostly on the evolution of the Internet of Things in this industry. That’s no surprise, since wearables are part of the broader IoT trend and can’t be treated as a standalone phenomenon. Let’s see how wearables and IoT technology help FinTech players stand out.
IoT continues to affect businesses
IoT gadgets (including wearables), IoT software, and sensors are advancing at a fascinating speed.
IoT connected devices installed base worldwide from 2015 to 2025 (in billions)
Of course, some people can’t wrap their heads around the idea of opening the door of their home with a Bluetooth device instead of good old keys or purchasing goods while standing in front of a smart fridge. But even so, the disruptors have their target audience.
FinTech is one industry that’s extremely interested in the successful implementation of connected everything. According to ItPro, 94% of businesses that have invested in IoT solutions have already seen a return on investment. To maintain their competitive strengths, business owners will have to use IoT in one way or another.
Wearable technology and FinTech: what are the opportunities?
Wearable devices connected to various gadgets extend the capabilities of connected things. A recent study by Ericsson ConsumerLab shows that 74% of respondents believe multiple wearables and sensors will help them interact with other devices and physical things around them.
The same survey suggests that by 2020, smartphone users will be ready to wear at least five wearable devices. Will at least one of these five be dedicated to digital banking services? The probability is high, and here are the reasons why financial services providers won’t make it without wearables in the financial sector.
Wearables in banking and IoT technology open a treasure trove of data for FinTech companies
The future of wearables in FinTech is often painted in rosy colors. Wearable in FinTech promise to increase productivity and efficiency through behind-the-scenes real-time decision-making. On top of that, wearables can help entrepreneurs solve critical problems and create innovative services with fascinating user experiences for their clients.
Even though it’s hard to predict whether the FinTech sector will be one of the top catalysts propelling the wearables market, it’s definitely primed to make use of the data produced. Wearables accompany users everywhere, and wearables in FinTech are mediators between users and data collectors.
The wearables market is expected to grow from 113.2 million shipments in 2017 to 222.3 million in 2021 with a compound annual growth rate (CAGR) of 18.4%.
Machine-to-machine connectivity, driven by the desire of users to always be connected, enables the massive collection and exchange of information from IoT sensors and wearable devices. According to Cisco, by the end of 2019 IoT devices will generate more than 500 zettabytes of data per year, and this figure will continue to grow.
FinTech companies, as tech-savvy counterparts to traditional financial services providers, know how to make use of this deluge of data. Big data analytics along with artificial intelligence powered by machine learning algorithms are a few of the many techniques aimed at creating safe, reliable, and seamless experiences for FinTech customers.
Wearable technology in FinTech helps companies reach customer-centric objectives
Wearables and IoT technology create more valuable client-bank interaction points. And the flow of information continues to create value for FinTech providers even when a client leaves a virtual or physical branch. Providers can easily capitalize on their access to loads of customer-specific and real-time behavioral data by providing targeted and personalized services. The formula for success is this: learn the client’s behavioral and consumption patterns, tap into big data opportunities, and deliver personalized, timely offerings. Profit!
Picture an ideal case of a successful and targeted customer decision journey. By using sensors and chatbots, a bank can establish communication channels with clients through wearable devices. When a client enters a big shopping mall or a fancy store, for instance, the bank can send a notification to the client’s device informing them of an increase in their credit limit. When the client leaves the store, the limit can be reset to the original value.
To gain a competitive advantage, payment providers should extend their offerings with wearable payments
In 2017 and 2018, the most popular mobile payment method accepted by online merchants worldwide was credit and debit cards. But the promising future of wearables in FinTech may change the landscape very soon. It’s actually happening already: contactless NFC payments are gaining popularity. By 2021, FinTech providers should probably be ready to let customers pay by waving a smart band or tapping a smart ring twice.
Digital banks and other FinTech market players should consider contactless payments using wearables and IoT technology. Android Pay, Apple Pay, Fitbit Pay, Garmin Pay, and Samsung Pay are already here. Although the tech leaders may lack creativity in naming, they have plenty of enthusiasm about making paying by wrist-worn an ordinary activity. As soon as wearable payments find bank support, participating banks will find a good many clients among the 830 million potential users of connected wearables.
As proof that over 175 million users all over the globe, including in Europe, are ready to pay with wearable devices, have a look at these solutions that combine wearable technology and FinTech:
- In the Netherlands, ABN AMRO bank is testing smart rings, watches, and bracelets as a new NFC payment method. The pilot project is still running. But the bank has reported positive feedback from clients, stating that 78% has reported positive feedback from clients are ready to use wearables as a major payment method permanently.
- An Australian bank called Bankwest has also conducted trials with wearable technology and FinTech. They went even further and introduced the Halo ring, the bank’s own wearable payment device. The Halo ring links to a client’s account and works just like a contactless payment card.
- All over the world, banks are broadening their support for devices and platforms for wearable payments. Recently, a number of global banks have established partnerships with Fitbit. The goal of this famous fitness products provider is to bring NFC payments to their Ionic smartwatch. Namely, Bank of America, the Royal Bank of Canada, HSBC, ANZ, Banco Santander, Capital One, OCBC, UOB, Cornercard and US Bank, and First Tech Federal Credit Union have all agreed to support the Fitbit Pay platform.
Customers expect providers to be in tune with the disruption caused by wearables in the financial sector
It’s not only the ability to pay with a wrist that attracts the target audience of progressive financial services providers. It’s more about the seamless omnichannel experience. Today, it’s a smartwatch with NFC capabilities; tomorrow it might be a t-shirt with a microchip or sensor embroidery. Demanding clients expect service providers to follow wearable technology and FinTech trends even if they seem a bit gimmicky because they want to be at the forefront of the future of wearables in FinTech. It’s the irony of the technological world: one day a new bleeding-edge technology is a gimmick, the next it goes mainstream.
Competition in the financial sector is severe. Traditional banks, digital banks, FinTech startups, and even non-banking institutions are aggressively pushing digital innovations to take on traditional banking services. Offering advanced services available only through IoT in combination with solutions for wearables in FinTech can be a perfect strategy to outpace competitors and retain users. Here are some examples:
Wearables-based cash withdrawals at ATMs. The Australian and New Zealand Banking Group (ANZ) is now accepting cash withdrawals via smartwatches. Cash at the group’s ATMs can be accessed through Apple Pay, Samsung Pay, Google Pay, Garmin Pay, and Fitbit Pay.
Smart user authentication. Through body proximity, FinTech service providers can easily authenticate users at any time. Wearables constantly capture their owners’ biometric data, which can be used for authentication, providing a high level of security with a minimum of user intervention.
Basic operations possible on wearable devices. To eliminate the challenges connected with a small screen and lack of a keyboard, FinTech providers can focus on voice technologies. The simplest transactions along with basic mobile banking features should be available from popular devices. For instance, users will greatly appreciate the ability to pay bills, check account information, and submit requests to service providers through their smartwatches.
Wearables and IoT technology provide new possibilities for risk assessment in various FinTech sectors
The combination of embedded devices and vast amounts of data rich in personal details and activity patterns provide FinTech players with advanced models for risk assessment. Peer-to-peer lending platforms, banks, insurance companies, and other institutions want to know more about the people they’re working with. Tiny devices that users wear every day can provide detailed information on a person’s general sense of responsibility.
By accessing information about spending habits, prior bank interactions, work and leisure hours, and other similar things, banks will be able to minimize risks when offering credit. For insurance companies, collecting metrics like hours spent on physical training, alcohol consumption, smoking preferences, and risky driving patterns can make a difference when deciding on issuing insurance. On top of that, the ability to collect data from IoT devices paired with big data capacities and insights that wearables give into an individual’s life may simplify the underwriting process for P2P lenders.
FinTech institutions that maintain pace with wearables and IoT technology trends will have a business advantage thanks to their tailored offerings, convenient user experiences, and informed data-driven decisions. For now, the mass application of wearables in the financial sector is still restricted by security threats, legislative constraints, and the fact that wearables remain secondary to smartphones. However, increasing demand for contactless payments, the popularity of startups creating software for wearables, and continuous investment in wearables in FinTech on the part of tech giants and payment service providers paints a promising picture.
If you’re interested in extending the digital capabilities of wearables in FinTech, Intellias is here to be your technical partner. With experience in the FinTech domain and profound expertise in IoT solutions, we’re ready to help you align wearable technology and FinTech, from concept validation to software integration. Contact us now.