Apple Watch – a gamble worth making for wearable banking?

Author: Clayton Locke

Contactless payments, frictionless two-factor authentication, and convenient push notifications hold immediate appeal.  Will the Apple Watch be the next platform for wearable banking? Or do the risks outweigh the promise?

Rumours of an iWatch have been circulating for years and
Apple’s entry into the ‘wearables’ market has been expected for some time.  It came with all the confidence you’d expect from a company that’s made a habit out of defining and redefining personal computing:

” … once again Apple is poised to captivate the world with a revolutionary product”

– Tim Cook, Apple CEO

For all its swagger though, the fact is that even as a late entrant Apple is taking a big gamble.

Smart watches have proved to be the most popular kind of wearable computer but sales are dwarfed by the gargantuan smartphone market. Only about 20 million smart watches were sold in 2013 against well over a billion smartphones.  In the short term, the market Apple Watch is being launched into seems almost irrelevant.  But Apple also generated $8.5 billion in profit last quarter and have the muscle to take a shot at creating a new market for wearable computing.

In the long term the rise of wearable technology looks inevitable. The limits of cost, miniaturisation and material science that force our gadgets to adopt hard, boxy form-factors are pushed back every year.

As those restrictions are lifted we’re increasingly free to create devices that are, quite literally, a better fit.

That’s creating an environment of enormous possibilities but so far nobody has managed to find the magic combination of ingredients to ignite the market.

Something to note: the likely Apple Watch customer base, the so-called digital natives, has lost the watch-wearing habit.  According to a 2011 YouGov poll 30% of 16-34 year olds in the USA don’t own a watch.   75% of them weren’t wearing a watch at the time they were polled.  But the point is that the Apple Watch is not just a watch.  It is a fully featured computer that you wear on your wrist.

Apple is betting on making their wrist-wear not only feature rich but also an item of fashion. In its short life the Apple Watch has already put in star turns at the New York and Paris fashion weeks and graced the cover of Vogue China.

It can be an immensely powerful commercial force, or it can be a fad. Fashion creates the furious churn that powers the saturated mobile phone market and it’s fashion that helped propel the iPod into the stratosphere, ahead of cheaper, more feature-rich competitors.

Should financial institutions invest in wearable banking?

Just like the tech giants exploring the market with their hardware, banks and other financial institutions are faced with a decision on wearables.

They can choose to invest now in software for products like the Apple Watch or they can watch from afar.

To avoid being like the bank that was late into mobile because they already had a web site, banks need to see wearable computing as a potential new touch-point with their customers.  For an industry that needs to figure out ways to get closer to their customers, and to impress digital-natives with ease of use across channels – wearables definitely have potential. Companies who choose to explore now are also equipping themselves with very valuable domain expertise.

It’s not enough to simply be present on a platform with a re-skinned website or an app ported from a phone – customers demand products that work well and the best apps are the ones that use each platform’s unique features to their best advantage.

There are three areas where that convenience makes it a form factor with serious promise for the banking sector. 

Contactless payments

Anyone who’s used an Oyster card to get around London can tell you that waving your card at a ticket machine beats feeding it in. Contactless payments are all about convenience and, short of thought control, it doesn’t get easier than waving your hand.

Authentication

Everybody knows that passwords have had their day but nobody is sure what’s going to replace them. A two-factor scheme that requires fingerprints and a unique device nearby could provide users with a very powerful but completely frictionless authentication scheme – one that works as soon as you start typing.

Notifications

Notifications are extremely useful because they work regardless of which app your using and even if the phone is locked. That usefulness diminishes considerably if you aren’t already looking at your phone though.

The most apparent advantage of the wristwatch over the smart phone is convenience. For simple, frequent tasks the small convenience of not having to pull your phone out of your pocket adds up to a big advantage. It might seem like a micro-convenience, but as our computing machines become miniaturised, so does consumer demand for the slimmest utilities.  Banks would do well start exploring how this utility can be leveraged to build closer relationships with their customers.  

31 Oct 2014

Author: Clayton Locke

Contactless payments, frictionless two-factor authentication, and convenient push notifications hold immediate appeal.  Will the Apple Watch be the next platform for wearable banking? Or do the risks outweigh the promise?

Rumours of an iWatch have been circulating for years and
Apple’s entry into the ‘wearables’ market has been expected for some time.  It came with all the confidence you’d expect from a company that’s made a habit out of defining and redefining personal computing:

” … once again Apple is poised to captivate the world with a revolutionary product”

– Tim Cook, Apple CEO

For all its swagger though, the fact is that even as a late entrant Apple is taking a big gamble.

Smart watches have proved to be the most popular kind of wearable computer but sales are dwarfed by the gargantuan smartphone market. Only about 20 million smart watches were sold in 2013 against well over a billion smartphones.  In the short term, the market Apple Watch is being launched into seems almost irrelevant.  But Apple also generated $8.5 billion in profit last quarter and have the muscle to take a shot at creating a new market for wearable computing.

In the long term the rise of wearable technology looks inevitable. The limits of cost, miniaturisation and material science that force our gadgets to adopt hard, boxy form-factors are pushed back every year.

As those restrictions are lifted we’re increasingly free to create devices that are, quite literally, a better fit.

That’s creating an environment of enormous possibilities but so far nobody has managed to find the magic combination of ingredients to ignite the market.

Something to note: the likely Apple Watch customer base, the so-called digital natives, has lost the watch-wearing habit.  According to a 2011 YouGov poll 30% of 16-34 year olds in the USA don’t own a watch.   75% of them weren’t wearing a watch at the time they were polled.  But the point is that the Apple Watch is not just a watch.  It is a fully featured computer that you wear on your wrist.

Apple is betting on making their wrist-wear not only feature rich but also an item of fashion. In its short life the Apple Watch has already put in star turns at the New York and Paris fashion weeks and graced the cover of Vogue China.

It can be an immensely powerful commercial force, or it can be a fad. Fashion creates the furious churn that powers the saturated mobile phone market and it’s fashion that helped propel the iPod into the stratosphere, ahead of cheaper, more feature-rich competitors.

Should financial institutions invest in wearable banking?

Just like the tech giants exploring the market with their hardware, banks and other financial institutions are faced with a decision on wearables.

They can choose to invest now in software for products like the Apple Watch or they can watch from afar.

To avoid being like the bank that was late into mobile because they already had a web site, banks need to see wearable computing as a potential new touch-point with their customers.  For an industry that needs to figure out ways to get closer to their customers, and to impress digital-natives with ease of use across channels – wearables definitely have potential. Companies who choose to explore now are also equipping themselves with very valuable domain expertise.

It’s not enough to simply be present on a platform with a re-skinned website or an app ported from a phone – customers demand products that work well and the best apps are the ones that use each platform’s unique features to their best advantage.

There are three areas where that convenience makes it a form factor with serious promise for the banking sector. 

Contactless payments

Anyone who’s used an Oyster card to get around London can tell you that waving your card at a ticket machine beats feeding it in. Contactless payments are all about convenience and, short of thought control, it doesn’t get easier than waving your hand.

Authentication

Everybody knows that passwords have had their day but nobody is sure what’s going to replace them. A two-factor scheme that requires fingerprints and a unique device nearby could provide users with a very powerful but completely frictionless authentication scheme – one that works as soon as you start typing.

Notifications

Notifications are extremely useful because they work regardless of which app your using and even if the phone is locked. That usefulness diminishes considerably if you aren’t already looking at your phone though.

The most apparent advantage of the wristwatch over the smart phone is convenience. For simple, frequent tasks the small convenience of not having to pull your phone out of your pocket adds up to a big advantage. It might seem like a micro-convenience, but as our computing machines become miniaturised, so does consumer demand for the slimmest utilities.  Banks would do well start exploring how this utility can be leveraged to build closer relationships with their customers.