This week is all about Wearables. This is part of a series where we look at impact of different disruptive technologies on Finance. In the past we have covered Blockchain, Artificial Intelligence, Regtech, Chatbots and XBRL.
Today is a background briefing on the technology and its broader implications. Then on Tuesday we do WealthTech, Wednesday is Small Business Finance, Thursday is InsurTech and Friday is Consumer Banking.
Bookstop or useful?
VCs are salivating. Instead of just one mobile device, we can be persuaded to have our whole body festooned with them. Fitbit did an IPO, Apple launched the Watch, Facebook bought Oculus, etc.
However, evidence mounts that we buy them and give them as presents but don’t find them as entertaining or useful as the PR would have us believe.
There is lots of excitement in the market:
- Fitbit began 2016 the same way it finished 2015: as the undisputed leader in the wearables market and the company is valued (in the public market) over $3.8 billion.
- Xiaomi supplanted Apple in 1Q16 and captured the number 2 position.
- According to Apple, the Watch has met the company’s expectations.
- Garmin finished slightly ahead of Samsung with wristbands and watches.
- Samsung landed in the number 5 position on the success of its Gear S2 and Gear S2 Classic smartwatch.
- BBK tied with Samsung for fifth place worldwide.
But here is a reality check:
- The Apple Watch did not make a dent in the numbers for Phones and Laptops.
- An app on the phone we already have does a lot of what these. devices aim at. The games are getting better. There are apps for many sports (the one that tracks speed for skiers is a personal fave).
Device issues – battery, wifi
The reality is the products still need some technical work. Batteries need to last weeks or months, not hours or days. Otherwise it is just another hassle. Each device needs to be able to communicate standalone, not via our phone. Until that happens we all end up as amateur systems integrators pressing buttons on a help desk service in angry frustration.
They also need to be smaller and lighter. Then a bit more fashion sense will help – we don’t all love geek chic. Imagine a world where instead of wearing a smartband or smartwatch to track activity and heart rate, we could just put on our favorite shirt. The buttons on that shirt would capture data from our bodies, source power wirelessly and communicate to the world to the services we want. This “nanny button” will tell us when to hydrate, when to get out of the sun, when to take it easy, and when best to sleep.
Moore’s Law is relentless and the money to be made is huge, so we can be confident that all these things will happen.
There are fun devices and there are useful devices. For people with medical issues, wearables can be – literally – a lifesaver. They can do things that previously we had to go to a doctor to have checked. They can alert somebody in an emergency and take continuous blood pressure measurement – and turn us all into Woody Allen.
Whether we use the device for fun or health, the impact on Finance is all about the data that they output. Devices can capture the wearer’s location, activities and biometrics. This is a goldmine that can be used to personalize products and services, such as relevant account alerts and offers. The cashier (probably a machine not a human) can detect you are in line and ready to pay and line up your preferred method of payment.
Privacy & data ownership
Data exhaust raises the issue of privacy and & data ownership. This is where Banks could become the trusted repositories of data that we own. That data could be stored in central cloud data centers (today’s reality) or on the Blockchain (tomorrow’s promise). The key issue is ownership and control – a tricky issue when so many business plans are based on monetizing consumer data.
Payment convenience comes at a price. If the device is lost or stolen, that same data goldmine is available to thieves. The defense is triangulation – something you own (device) + something you know (eg PIN) + something we know about you (eg location).
The crypto defenses are also changing. FIDO Alliance are developing new authentication processes for password-less security options like voice and fingerprint verification.
Bankers are researching wearables
According to one study, 15% have something in the works, and 72% have it on their roadmap for the next three years. 66% cite proximity payment as the play.
Banks will be hard pushed to earn trust in this area compared to trusting GAFA (Google, Apple, Facebook Amazon) and BAT (Baidu Alibaba Tencent). Given the privacy issues of all the ad-driven Internet Platforms, banks have a great potential pitch “they think you are the product, we think you are the customer”. See this post for more.