Smartwatches: The Danger in Santa's Sack

Smartwatches are set to be one of the hottest gifts of the holiday season this year. But if you find yourself spending Christmas morning configuring a new wrist-bound gizmo, keep in mind that a darkness lurks in this part of Santa’s bag.

Smartwatches are mostly used for notifications and to easily tap into smartphone apps in a more convenient way than via Android or iPhone. That’s especially true for banking apps. According to a Juniper Research report, the use of smartwatches to access ‘push’ banking information services has been steadily gaining traction over the past 12 months and shows no sign of slowing.

In all, the global number of banking apps accessed via smartwatches will reach the 10 million mark in 2017, rising to more than 100 million by 2020. A number of global banks have launched apps for the wrist, while the launch of Apple Watch in April 2015 further accelerated the demand for wearable banking apps.

“We do believe that, keeping pace with technology evolution, wearable banking will witness a faster adoption rate than mobile banking especially amongst millennials,” said research author Nitin Bhas.

SMS-based push banking services are on the decline with banks noting a decline in average number of messages sent to mobile banking users. So the research also observed that banks have introduced a number of innovative new services in the space, such as augmented reality banking apps and a cashless money box.

These generally have a short life span with the consumers however, so, Juniper believes that banks and financial institutions will need to offer customers more targeted services, aimed at specific user needs. This will be enabled through customer analytics and big data management platforms from vendors such as Oracle, Infosys, Fiserv and SAP.

“Digital banking has experienced a substantial progression towards personalized computing,” Bhas said.

Here’s where the lump of coal comes in. Personalized services means leveraging personal information—and that means more data that’s available for leakage.

And apologies for being a Grinch, but consider that studies have shown that smartwatches with network and communication functionality, like the Apple Watch, clearly represent a new and open frontier for cyber-attack: HP Fortify has in fact found that 100% of the smartwatches that it tested contain significant vulnerabilities, including insufficient authentication, lack of encryption and privacy concerns.

In a bright spot, Juniper believes that while wearables, including smartwatches and glasses, are not suited for conducting complicated financial instructions, wrist-based wearables will become a key device for multi-factor authentication—for banking transaction approval in the future.

Photo © Georgejmclittle

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