Small Banks Get Surprising Head Start on Apple Watch

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The Apple Watch has many functions, and one of them may be leveling the playing field between big and small banks.

Five banks have made it public that they will offer apps for the smartwatch when it officially goes on sale April 24, and four of them are community banks. (The fifth is a megabank: Citigroup.)

These apps mark the banks' first forays into wearables — a category expected to take off with consumers and one that bankers hope will be more convenient and engaging for consumers than existing banking channels.

The early adopters get to associate themselves with a hot product made by a beloved brand.

Reports show that the Apple Watch, which customers began preordering last Friday, is already on back order until June for some models. Slice Intelligence, a firm that researches consumer spending, estimates nearly one million preorders were placed in the U.S. on the first day.

"There are few times in your life you get an opportunity as a company or an institution to launch [an app] the day Apple launches," said Robb Gaynor, chief product officer of Malauzai Software, a financial technology firm that has developed an Apple Watch app for bank customers to white label. "It's a lot of fun."

Moreover, with only one of the top ten U.S. banks (Citi) having announced an app, Gaynor views the initiative as an example of smaller institutions outpacing the big banks on a new platform.

Four community banks and three credit unions will be live with Malauzai's Apple Watch apps by the time the smartwatch is in consumers' hands. The first iteration of their apps will include basic features like checking account balances and finding branch locations. One of the early adopters is Happy State Bank in Texas.

Matthew Smith, vice president of e-banking services at Happy State, said the Apple Watch app helps show consumers smaller banks can be at the forefront of new technology.

And the appeal to be an early adopter struck a chord with Happy State's top management. Smith recalls his chief executive being speechless for a few minutes when presented with what he considered a great opportunity.

Smith views wearables, which come laced with technology like heartbeat monitoring, as a place banks will need to be, just like smartphones.

"Banks have never been in the position they are in today," Smith said. "In the past, customers had to go out of their way to go to the bank. …With mobile technology, banks are everywhere the customer is. We are in the customers' back pocket.

"Banking shouldn't be hard. Banking should be easy."

The other Malauzai bank clients that will have apps for the Apple Watch are: Ameriana Bank in New Castle, Ind.; Customers Bank in Wyomissing, Pa. (whose BankMobile unit will have an app separate from its parent's); and First United Bank in Dimmit, Texas.

Other institutions could come into the fold. In fact some may have already but are barred by nondisclosure agreements from discussing it yet.

The investment could drive big increases in interactions with customers, Gaynor said. "We think engagement levels will be higher than mobile," he said.

Seventy percent of Malauzai's users use its current mobile app at least once every ninety days, but the watch might invite more frequent activity.

To be sure, it remains to be seen how mainstream Apple's next big thing will become: its least expensive watch is $349, and all of its models have to be used in conjunction with iPhones. But making available an app for a smartwatch provides banks with experience in a category some believe will be an inevitable part of the financial services mix.

"Watches will have a place long term," Gaynor said.

Certainly, Tangerine — which already developed an Apple Watch app that will go live on April 24 — saw the investment as important and a part of the natural evolution for the Canadian bank. "We want to be where our clients are going and to be there as soon as possible," said Charaka Kithulegoda, chief information officer for Tangerine.

Tangerine has tested apps for other wearables like Samsung, but the Apple Watch app will be the first it will make widely available.

Kithulegoda believes watch banking could help people have more casual interactions, like when they are waiting in a grocery line and want to check a balance.

"Imagine just glancing at your wrist and knowing what's going on," Kithulegoda said.

He believes certain functions will get more use on a wearable device than on the smartphone because of the convenience of consumers not having to "take steps out of their day to find out what's happening in their financial lives," he said. "Quick interactions will translate more into wearables."

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