What These Banks Learned About Wearable Devices, Augmented Reality

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When Westpac New Zealand recently took its Google Glass app on a road show to branches up and down the country, customer reactions took the bankers by surprise.

For example, customers were not as interested in using voice commands with wearable computers as expected. Many in the U.S. feel that voice commands are going to be the feature that makes wearables supremely useful, and Westpac's Google Glass app is set up so the user can ask things like, "What's my balance?" out loud.

"What we've found is that people want to be able to swipe and touch rather than have voice commands, which was a really interesting insight, because people are quite personal and particular about their finances," said Simon Pomeroy, chief digital officer for the Auckland-based bank "If we're talking to someone from our bank, we would do it in a more private space. It started telling us that voice commands were good for certain things but tap commands and swipe commands were better for other things." The bank is backing off from voice recognition for now.

Westpac's experiments in letting people bank using Google Glass, smartwatches and augmented reality are a test case from which others could learn, at a time when many believe wearables are about to become mainstream and banks can't afford to lose customers to faster adopters. U.S. Bank in Minneapolis and an Australia bank have also tried out these emerging technologies and shared some of their early findings.

Test participants in Westpac's pilots have liked the speed and ease of use of Google Glass, Pomeroy said.

"The initial reaction of everybody is 'this looks quite gimmicky,'" he said. "But as soon as those glasses go on, people's perception changes in a strange way. The first thing they say is 'wow.' The second thing people do is try to get themselves into this new routine of tapping and talking. But it's amazing how after just a minute with Glass on, people get very comfortable very quickly."

One aim of Westpac's digital banking strategy is to make it so that a customer is never more than a click away from a person at the bank. That includes wearables.

"You might start in a digital world, say, 'Call Simon my banker,' and someone pops up in a corner of the screen to have a conversation with you as you go," Pomeroy related.

The bank has also been testing an app that lets people check their bank account balances from a Sony smart watch and is in the final stages of working on a Samsung version. So far, the adoption has been slow - only a few hundred people have downloaded the smart watch app. Pomeroy expects those numbers to tick up as smart watches become more popular.

Dominic Venturo, chief innovation officer at the $367 billion-asset U.S. Bank, which has also conducted smartwatch pilots, takes a rather dim view of wearables. "You have to look at the use cases," he said. "Pushing alerts [to wearables] makes sense. Anything more complicated, probably not."

He saw more potential in augmented reality, a technology Westpac is also working on. AR provides a kind of digital annotation for real-world objects by overlaying data on the screen of a device. A bank customer walking down the street could see a map of nearby ATMs and branches overlaid on the surroundings.

"We've found value in the augmented reality space with our Find US branch and ATM locator, which we launched just over two years ago," Venturo said. AR could similarly help with "Find US Offers," a location-based discount finder program the bank is piloting. It gives the user the option to seek discounts from participating nearby merchants with the click of a button.

The technology can be useful in dense urban environments where maps are not easy to interpret or navigate. It also can be useful where maps do not go, Venturo said. For example, it could direct a user to not just an address, but precisely the right side of the building.

Westpac's augmented reality, which is still under development and expected to launch in September, is a bit more involved. It lets customers do things like hover their smartphone over a credit card, and instantly view the last five transactions on that credit card account as well as make a payment. It provides 3-D visualizations of certain aspects of the customer's finances.

The concept came from a crowdsourcing challenge the bank runs in New Zealand and the U.K. A customer who happens to be a rocket scientist by training with a hobby of augmented reality created a prototype, which the bank ran through its security and other protocols and adopted.

"When we saw this, we thought, this brings it to life in a quick, easy, visual way, and shows the potential of augmented reality from the phone, Google Glass and other devices," Pomeroy said. "It starts giving customers more control or insight into their finances. For most consumers, personal financial management becomes quite cumbersome, it can look quite techie. This brings it to life in a really simple way."

Westpac is introducing augmented reality on its smartphone apps, and may expand the feature to its smart watch and Google Glass apps. "We think augmented reality has a place to play in banking, whether it's through mobile phones, Glass, or any device the customer chooses to use," Pomeroy said.

The way Westpac builds apps is flexible — if it creates one for Android phones, it's not hard to repurpose for Google Glass. "So when devices take off, we'll be the first in the world to be able to use these things," Pomeroy said.

Another bank testing wearables is Bendigo and Adelaide Bank in Australia. It recently launched a mobile ecosystem called "redy" that works with wearable devices. Last week it conducted what it believes was the first payment transaction by a bank in the world on a Samsung Gear 2 watch.

Redy is based on QR codes. The merchant has a redy terminal, which is a Samsung Galaxy miniature tablet with a stand and a charger. (The bank has a partnership with Samsung Australia.) The terminal is locked down so that it only runs the apps the bank chooses, through AirWatch's mobile device management system. (This lets the bank see the GPS location of all terminals and helps it troubleshoot any issues.) The merchant pays 25 Australian dollars a month for a redy tablet and 1.5% per transaction. Redy takes 1% as a fee for service and the merchant gives 0.5% directly to the shopper as "creds" (reward points).

At the point of sale, the wearer opens the app on her device (in this case, a watch) and the merchant creates a unique QR code for the purchase, which the customer scans. According to the bank, the transaction is secure as the merchant never captures any personal information about the buyer.

"We chose QR codes as they give us the most ubiquity," said Rick van Emmerik, senior business analyst at Bendigo and Adelaide Bank. This lets users of iPhones and older Android devices use the system and avoid the incompatibility issues of near-field communication.

"We've actually found that most average users don't even know what NFC is," van Emmerick said. The QR code also lets people donate to charities such as the Royal Children's Hospital in Melbourne without providing a card number over the Internet. Redy was developed internally by Community Telco Australia, which is owned by Bendigo and Adelaide Bank. (It's the only bank in Australia that owns a telco.)

The bank ran a pilot in two small communities in Victoria, Australia over a four-month period in 2013. All of the users surveyed said they would use redy more broadly if it were launched nationally. About 86% said they would recommend it to a friend.

"The things we have learned are that shoppers do value security and the fact that this mobile payment system is [provided] by a bank has given them comfort," Van Emmerick said. In Australia there has been a lot of consternation about the fact that consumers don't have to verify transactions less than $100. Redy transactions are secured by a PIN, supplemented with device ID. If a redy user logs in with a different device, the bank sends her an email warning.

In June 2014, the bank launched redy in the Australian market and is thinking about expanding its partnership with Samsung. "We will be looking at how we can leverage the new Samsung Gear Live," van Emmerick said.

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