Zapp makes progress

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Oct 8th, 2014

Clients following our payments research will know of our interest in Zapp. Zapp is a new UK payment method that utilises the Faster Payments scheme. Zapp is a way for the merchant to create a Faster Payment in the consumers device (mobile/tablet/laptop) using a wide variety of methods (bar code, SMS, QR code, etc). This provides all the relevant data – value, account details, etc. The consumer then just authorises the payment.

We’re interested for a number of reasons.

Firstly, as mentioned in my first real-time payments research report, there seems to be a myth that real-time payments are P2P payments primarily. Zapp is very much a way for consumers to buy things both online and offline.

Secondly, there has been a move to thinking about real-time payments enabling other products, rather than just being a standalone payment method. These are known as overlay services, and a number of initiatives (Australia, Finland) have explicitly stated their desire for overlay services to be created. A few overlay services have been created for Faster Payments – PingIt and PayM for example – Zapp is by far the biggest, most ambitious, and potentially, disruptive.

Thirdly, Zapp state that is cheaper than the alternatives. Implicit in this, is cheaper than cards. Zapp are very careful to ensure the language they use doesn’t imply its card like (and therefore potentially subject any regulation around fees that could be considered interchange). Yet the route to market includes using large merchant acquirers.

With any new payment method, adoption is slow. Payments are a 2-sided market. You need sufficient numbers of consumers to have adopted to interest merchants – yet consumers won’t adopt something that they can’t use. Zapp has potentially half the equation solved, with large banks signed up and Faster Payments reaching 100% of UK current accounts. It was interesting to see then the announcement this week that Zapp have signed some major retailers to take part. Furthermore, these are big, household names – Sainsburys and Asda are two of the largest supermarkets in the UK.

With official launch in 2015, there is still a long way to go, but the chances of success seem to improve daily.

Creating an ecosystem to drive disruption

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Oct 6th, 2014

We usually talk about how hard it is for the financial industry to innovate at the right pace, and doing the right bets. In my opinion Latin America lags a little bit behind, in part for not having anything similar to the US’ Silicon Valley. We see though, increasing efforts to generate the environment and providing places for the ecosystem to mingle.

Adding to Dan’s post about Celent attending the several industry conferences around the world as part of our job, and keeping our finger on the pulse of the industry, I wanted to share a relatively new conference that is gaining a lot of traction in Latin America as a result of its effort to bring together traditional players with fintech start-ups: Next Bank.

I will be moderating a panel on Digital transformation in financial services next October 16th, 2014 at Next Bank Americas. The idea is to create an environment where innovators from within and outside financial services institutions come together to explore the digital transformation of the industry.

It is a collaborative conference that covers innovation, transformation and startup-driven disruption in financial services in Latin America. The theme is re-think and connect – addressing the reality that the industry is undergoing momentous change and it’s time for a new collaborative approach.

You will more likely encounter traditional players like banks, consultancies and technology vendors sharing the stage with alternative players like startups, digital ecosystems and players from other industries. All of these players, the old and the new, coming together to create a new community of innovators in financial services exploring the real future of the financial services industry and the big ideas that will forever change the industry in the region

As part of the conference, it will host the final of BBVA Open Talent for the US, Mexico and Canada, a startup competition in search of today’s most disruptive tech startups in these countries in two categories, New Banking and Digital Life. Celent will be writing a report of those more promising start-ups, so expect it coming soon after the conference.

Celent is also a conference partner, so feel free to use our discount code (C3L3NTNB4M3) to get a deal on tickets.

More information @

Hope to see you there!

Gearing up for Money 2020

Dan Latimore

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Sep 29th, 2014

One key element of Celent’s value proposition is our attendance at conferences. To be a little flip, we attend so you don’t have to! More accurately, we attend because you have neither the monetary nor the time budget to jet all over the world to industry events. For us, it’s part of the job, and we get to keep our finger on the pulse of the industry at gatherings hosted by individual firms and neutral third parties. In September alone, for instance, I’ve been in Panama, Barcelona and San Francisco. A more comprehensive (although not necessarily complete) list of our attendance is below (and that’s just the third-party events!).

Money 2020 image

One event that’s come incredibly strong out of the gate is Money2020. Its first incarnation was two years ago and garnered more than 2000 people; last year it had over 4000, and this year is shooting for over 6000. Celent (Zil Bareisis and I) will be attending (and in full disclosure, we are a media partner of the event). We view this as a “must;” the breadth of the ecosystem attendees is immense, the diversity of topics fascinating. In the last two weeks I’ve mentioned Money2020 to two clients and both have replied that they’d have to look into attending, particularly based on my positive feedback from last year’s event.

If you’d like to register, please go to

Look for us to tweet, blog and otherwise have a host of insights after this and other fall conferences. What events do you consider crucial?

Why I’m not Buying an Apple Watch

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Sep 17th, 2014


First reason –I’m an Android user and enthusiast : )

Like it or not, Android and iOS don’t play nicely with each other, and the Apple Watch is a companion device for the iPhone. It’s definitely an intriguing device though, and I enjoyed learning more about how Apple plans to tackle the wearables space. The Apple Pay announcement was also extremely fascinating – my colleague Zil has prepared an excellent and informative review of Apple Pay.

Back to the topic at hand. Why would I stay away from this device? A few reasons come to mind, some are banking related, and others are not:

  • The battery life is expected to be pitiful. The rumour is that this device will POSSIBLY last through the day and will need to be charged every night. I have to regularly remember to charge my laptop, mobile phone, Fitbit, tablet, Kindle, kid’s iPad, and a bunch of rechargeable batteries that are used in various toys and gadgets around our household. I don’t want anything else that I need to charge regularly, and I certainly don’t want to travel with another charging cable or dock. My goal is to downsize our chargers and we need better battery life and a set of charging standards to be able to do this. Note that this comment isn’t specific to the Apple Watch – it’s an issue for the Android Wear watches as well, and the primary reason I’m hesitant to dive in. I’m also a believer that the success of mobile payments will be contingent upon battery life (among other things). Who wants to end up at the POS with a dead device or worry that this could happen?
  • It only comes out in early 2015.  The slew of Android smartwatches has clearly put pressure on Apple to ANNOUNCE a device but they obviously aren’t ready to release it. Otherwise, it would have ended up on the shelves as rapidly as the new iPhone 6 and 6+.
  • It’s a first generation offering. This builds on the previous point regarding battery life and release date. Like most new products, this first gen device will require some improvements. It will certainly be fun to tinker with, but will be frustrating at the same time. If you are an iPhone user and you want a smartwatch you are limited to this first generation offering. Note that competing Android offerings from Samsung have already gone through multiple product iterations and will be even further along by the time the Apple Watch is released. Motorola and LG also have first generation products out there that will be rapidly refreshed.
  • I don’t think it’s very fashionable. I like watches and there is much to appreciate about a beautiful timepiece. A watch is my primary if not only “accessory.” To me this watch looks a bit childish and cheap. Not to mention that if you want a nicer band or colour it will cost more money. My wife disagrees with me, she thinks it’s awesome and she is an iPhone user. Most of the Android watches aren’t that fashionable either, with the exception of the Moto 360 (save for the black bar at the bottom of the screen) and the LG G Watch R. The watches will get nicer over time and it will take a generation or two for these to become more elegant timepieces. Note that not everyone shares my opinion about the Apple watch as a fashionable timepiece – Hodinkee, a watch review site (not a tech site), finds the watch to be well made and fashionable. Hat tip to Jimmy Dinh for pointing me to this particularly informative review.
  • Health reasons. Radios communicating everywhere – in my pocket, my house, at the office, etc. Do I need another, particularly one that is stuck to my body? I have no scientific data to back this up at this point, but I do think about harmful exposure.

Now that I’ve vented, here are a few reasons why I would consider the watch. I’m not sure they are enough though to justify the price tag:

  • I’m a gadget enthusiast. I’d buy a smartwatch for pure tinkering purposes. You’ve probably gathered by now that I like this stuff. Even if it’s not practical, I enjoy a hands on approach to understanding how these devices work and what they can be used for.
  • As a fitness device and companion. I currently wear a Fitbit, and while I really like it, I’d like to get rid of it. It’s just something extra to remember, carry and charge. This class of devices will likely disappear as heart monitors, step counters, etc. get built into smartwatches and mobile phones. The Apple Watch, or any other smartwatch could make a great bike computer or running computer.
  • To experiment with Apple Pay (in the morning of course, when the battery still works!).
  • As a conversation starter with bankers. I enjoy demoing cool technology to our banking clients that unfortunately don’t have the time to think about new technology or devices. Their day jobs are demanding and they turn to us for opinions on how emerging technology with impact the banking landscape.

Enough about me. More importantly, what does all of this mean for financial institutions? I recently blogged on wearables for banking and you can read more about that here. Even if the masses aren’t flocking to smartwatch banking, I believe that every bank should buy this watch and a couple of Android watches. It’s critical for banks to understand the impact of new technology and the best way to learn about it is hands on experimentation and experience. Buy a couple, give them to your senior digital banking product folks and tech staff so that they can form educated opinions. This will require some budget of course – a budget that every bank should have for research and development and the creation of new products. What I’m suggesting certainly isn’t typical or commonplace, but well needed if banks want to be the digital powerhouses that they are aspiring to.

Will you buy the Apple Watch? Why or why not? How does Apple Pay factor into your purchasing decision? Please weigh in with your thoughts or comments.

Wearables in Banking: Google Glass

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Sep 12th, 2014

Not too long ago I was at a client event and had the pleasure of trying on Google Glass for the first time. The presentation used a simulation of how it might work to make a payment using the voice commands of the device. I found the experience to be much less intrusive or distracting as I expected, but the applications within banking were still too immature to be useful. The much-anticipated technology went public earlier this year, and the industry is already abuzz about specific applications. In October 2013, Banco Sabadell in Spain became one of the first banks to create a retail app that allowed users to locate the nearest ATM, check account balances, and use video conferencing for technical support. PrivatBank in the Ukraine released a video in July 2013 previewing some of the features it plans on releasing for its own Google Glass app (see video below). The device is receiving a lot of hype, and it’s a natural fit for functionality that hasn’t taken off through mobile, such as voice recognition or augmented reality. Financial Institutions and vendors like Fidelity, Discover, La Caixa, Wells Fargo, Westpac New Zealand, Intuit, MasterCard, and LevelUp have already voiced interest in Google Glass or other wearables.

But should banks take Google Glass seriously as a possible channel? There are two ways to look at it. Google Glass, and more broadly wearables, should be taken seriously inasmuch as they COULD represent what the future of banking might look like. Wearable smart technology is indicative of the growing number of devices and channels. Whether those devices will be smart watches, Google Glass, a smart fridge, or whatever else is anyone’s guess. As banking becomes more digital, however, banks are going to be pressed to meet the customer on their terms, no matter the device. It’s the culmination of customer-centricity that’s so often talked about in the industry, and which forms the basis for most retail banking strategies.

Simply put, these devices are not yet worth the investment by banks. As with most new technologies, hype precedes real value, inflating expectations. A TNS survey from January 2014 found that, between August 2013 and January 2014, awareness of wearable technology grew in direct proportion with lack of interest, while adoption hovered around 1%. For head-mounted devices, awareness grew from 52% to 64%, while lack of interest went from 34% to 46%. At a time when many banks lack dedicated tablet or smartphone apps, it would be foolish to rush into a wearable app. Even the largest banks have struggled to keep up with number of smartphone and tablet devices that have much higher adoption. Why complicate the process by releasing or developing functionality for wearables? Banks are better served dedicating time to figuring out and overcoming the challenges of a unified customer experience, or building out existing, proven channels that are popular today.

Multichannel banking will assuredly get more complicated in the future, especially as transactions move out of the branch and become more digital. Banks looking to plan for the future, one that may necessitate a Google Glass or smartwatch app, would be wise to design a multichannel strategy that is agile enough to move with the market. For many institutions, this kind of timing will allow them to stay up-to-date with the trends, while not allocating resources too quickly to devices that may become liabilities.

Braveheart or need a brave heart?

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Sep 12th, 2014

A somewhat topical post, if mildly parochial, but which serves to highlight something more broadly. On September 18th , a new nation could be born, as Scotland goes to the polls to vote whether it should become independent from the rest of the UK. The debate has raged for months, if not years. The latest polls suggests a Yes win, with a flurry of activity now from the No camp.

Why blog about this? Well there are some interesting questions that would be raised in relation to payments that are worth highlighting here. Note that this is based on the hard line being stated primarily from the No camp before the vote, but one assumes compromises would be made if there were a Yes vote.

Whilst Scottish banks print and issue their own money currently (I have a Scotland-only £100 bank note on my desk), the Bank of England has categorically stated that there cannot be a shared currency. Debate rages about how quickly Scotland could join Europe, so equally the Euro is out as well

Central bank
Scotland would require a central bank to be able to issue a currency. The creation of one is not necessarily a technical challenge, but the funding of it in the short term might be.

Big business
Many big banks have already pledged to move their head quarters out of Scotland should there be a Yes vote – Royal Bank of Scotland, Lloyds (owners of Bank of Scotland) and National Australia Group (owners of Clydesdale). Note that this isn’t moving out of Scotland altogether – however, at least one unnamed source has hinted doing business in Scotland will become harder and less attractive. A new currency also means that every business doing business in or with Scotland would need to make the appropriate changes, and an equivalent changeover to the Euro switch would be required.


So what does this mean for payments? Well, nobody quite knows. On day 1, systems could keep running. But longer term, it poses some interesting questions. The options crudely are:

Keep as is – people continue to clear and settle in Sterling, regardless of location. Given the hard line on currency union (or lack of), this seems unlikely

Shared infrastructure – the infrastructure remains, but is dual currency, with an additional settlement site at the new central bank of Scotland. That works for Scotland-Scotland, and UK-UK (the sort codes could be mapped to allow this). This doesn’t address the cross-border issue.

Parallel infrastructure – Scotland recreates all its own systems. This would allow Scotland to plan the ideal system, and with low volumes, it would be relatively cheap to buy. However, it would require every bank and every corporate to change how they process paymenst as well… very expensive!

So what does this mean for payments? The fate of a nation is a big thing, and we shouldn’t trivialise it for the thing I’m interested in – payments. But it does serve to highlight how embedded payments are and how critical they are, yet the debate hasn’t mentioned them once. Without a payment system, any country would collapse in hours. Nobody is suggesting that this will happen of course – but then nobody is actually suggesting *anything*. Because payments are rarely thought about by anyone outside of payments, it’s pretty safe to assume that no-one has considered this fundamental part of how a country functions, and it will need to be addressed rapidly. I best go dust off my passport and get some Scottish visas I think!

Apple Enters Payments

Sep 10th, 2014

Yesterday Apple announced entering the payments space with Apple Pay, a new way to pay in physical stores and mobile apps. The move was not unexpected – the question of when and how Apply would do something in payments was subject to much speculation in recent months. At Celent we also published a report in March this year called Apple in Payments: What to Expect? Yesterday, we got the answer.

Details of the announcement can be found here. In this blog I would like to focus on some of the key highlights of the solution and consider its chances of success.

As we predicted in March, Apple did NOT launch an open wallet available on all mobile devices, including those using Android and Windows operating systems. Instead, Apple focused on providing a seamless payments experience for customers using Apple’s own hardware devices. In fact, those devices are only limited today to the newly announced iPhone 6 models and the Apple Watch. We can only assume that any future iPad models will also have this capability, as otherwise Apple would be shooting itself in the foot in the m-POS market.

Our report also discussed that Apple was going to make use of its relevant assets, namely access to card details registered at iTunes, Passbook app, Touch ID and biometric customer authentication, iCloud keychain, AirDrop and iBeacon. The first three are indeed at the heart of Apple Pay’s proposition. However, I was surprised to see no mention of iBeacons, especially given their potential synergies with payments. P2P payments capability is also currently missing. Again, I would expect we will hear more from Apple on both of those topics.

We thought that Apple would start with payments facilitation online before entering physical stores. However, yesterday’s solution addresses both areas immediately. Also, we thought that Apple might want to leverage NFC technology, but would implement it differently from traditional NFC contactless payments. Indeed, Apple Pay uses NFC in a very different way – instead of storing actual card details, Secure Element on the new iPhone only stores a token associated with a card. The payments transaction requires combining that token with a dynamic security code generated for each transaction and a biometric customer authentication based on Touch ID. This approach also turns card provisioning on its head – instead of starting with banks and TSMs, it starts with the customer who can take a picture of the card and have it “tokenised” immediately (assuming it is issued by one of the participant banks.)

It is interesting to note that when Google Wallet launched, they were not going take any cut on the payment transaction, but were seeking to make money from transaction data. Apple claims not to see any of the transaction data, which would alleviate major concerns for both merchants and issuers. However, it also begs the question of how Apple intends to make money from this service. One view is that they won’t. However, although unconfirmed, there are rumours that the issuers will be paying Apple up to 25 bps for each transaction. Some speculate that Apple, confident on the security of its approach, has promised issuers to take on some of the transaction risk. Others argue that Apple can pull it off because of its size and importance, perceived or otherwise.

Which brings us to a number of questions:

  • How easy will it be for Apple Pay to scale? The announcement talked about the issuers who agreed to participate as well as merchants that will be able to accept the service. But what kind of pre-existing relationships are required between Apple and issuers and merchants for the system to work? Clearly, issuers will need to be able to handle tokenised transactions, although that perhaps can be done by 3rd parties on their behalf. However, if they also need to negotiate the commercials, the enrolment process is likely to be more onerous. For merchants, my understanding is that any merchant capable of accepting contactless should be able to accept Apple Pay; however, online and in-app merchants would have to integrate Apple Pay into their checkout experience.
  • How will the merchants react? On one hand, Apple and its market clout can set the standard for the industry providing a much needed direction to merchants where to invest. It also helps that the approach is aligned with EMV migration in the US and any new terminal that the merchants install should be capable of accepting Apple Pay transactions. However, other questions remain, such as:

                    – How will MCX react? MCX just recently announced their own payments wallet, CurrentC; most of the big MCX merchants were notably absent from the list announced by Apple. Can MCX afford to boycott Apple? Can Apple Pay be successful without MCX merchants?

                    – What will it do to merchant transaction economics? US merchants have been enjoying reduced debit interchange rates and ability to decide how to route the transactions. Apple Pay is likely to tilt the balance back towards credit transactions. And how will the routing choice for debit work in the tokenised Apple solution?

  • How will the consumers react? Clearly, the early demos show a very slick user experience, as we have grown to expect from Apple. However, without any additional bells and whistles, will it be enough to convince the consumers to reach for their mobile phones instead of their cards when paying? Sure, Apple’s approach is more secure than a mag stripe transaction, but will consumers understand the nuances of tokenisation or will they rather remember the nude pictures stolen from iCloud? In Europe, these arguments are even weaker – many consumers already enjoy the benefits of EMV and the speed and convenience of contactless (card) transactions.

So, how significant is this announcement? Time will tell, and it’s not going to be an overnight success. Consumers will need to get the new phones, and while there are 800 million or so iTunes accounts, about 25 million of them are in the US and eligible for an upgrade next year. Merchants in the US will need to install and switch on contactless. And Apple will need to go internationally, where it enjoys a much smaller market share. Having said that, it is clearly good news for mobile payments, paving the way forward for new payments technologies such as tokenisation and biometric authentication. And after all the failed and floundering mobile payments initiatives, this is surely a cause for the industry to be cautiously optimistic.

FIS To Acquire Clear2Pay

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Sep 3rd, 2014

Rumours of this purchase have being down the rounds for months (I was discussing it in June at EBADay), although the acquirer has only been ever referred to as a “US Vendor”. In discussions with clients over the last few months, I’ve highlighted 5 potential suitors (including FIS), and of those, four for very similar reasons. All four have broad FS offerings, but have little or nothing in the core payments space, making Clear2Pay an obvious solution to plug a gap.(Clients – ping me for a discussion of who the vendors are).

For FIS, there are some additional benefits to the gap filling, as in addition to their OPF hub, Clear2Pay have card assets (including one of the largest install bases in chargeback management systems) and testing capabilities.Testing is a huge part of payments, but one which often gets overlooked.

For Clear2Pay the existing relationships that FIS has, particularly in the US, and the breadth of resources at their disposal, should have definite benefits.

There are some obvious challenges ahead, not least the fact that few “big company subsumes smaller company” stories come without casualties in the smaller company. With Clear2Pay being a very entrepreneurial company, with some very visible and involved leaders, it’ll be even more important than ever to address this early on.

More broadly for industry, it continues a trend of consolidation in payment vendors. Clear2Pay came close to being acquired a couple of years ago. That suitor, and the other three I highlighted in my conversations, now find themselves with both still with a gap, and now an arch-rival who has the largest and arguably most visible player in the market. One of the vendors I highlight has repeatedly approached one of the other payment hub vendors over the years. ACI, already a hub vendor, bought Distra, a payments framework, to strengthen their offerings. In short, this is a very important deal, signalling the coming of age of payment services hubs, and we very much doubt the last significant transaction in this space.

Banks as Coaches, not Scolds

Dan Latimore

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Sep 2nd, 2014

Soccer season is starting in New England, and I’m resuming my duties as an assistant coach for my daughter’s team. Just as our players strive to improve, so do I try to improve my coaching, and one of my key functions is to try to change player behavior. I do that through a variety of ways: through explaining, through modeling, and through feedback. It’s the last point that I want to focus on, because the way in which a coach gives feedback is critical, not only for the specific point in time, but for future interactions. Very simply, there are two types of feedback: positive and negative. The coach can say, “Great pass to space, Jane,” or, alternatively, “You missed Sarah on her run down the sideline, Jane.” Guess which one Jane reacts better to (and which one her teammates notice)?

What does this have to do with banking? Celent (together with many banks) has been talking a lot about the need to improve and solidify the customer relationship. One way to do this is to help the customer be more in control of their finances. This can happen when the bank gives feedback. Personal financial feedback, just like soccer coaching, can be positive or negative, and just like soccer, guess which one is more effective? And yet, most banks focus on providing unpleasant or negative news: “Your account is below the limit you set” is a relatively benign example, while “Your check has been returned for insufficient funds” is a more substantial one. It’s much more rare to see positive reinforcement: “Congratulations, you’re on track for the savings goal you set.” Simple, for one, is on to this, and it, together with a host of other features, led BBVA to buy it. Monitise, too, is touting “cuddle” alerts that seeks positive occasions for bank touchpoints.

A bad outcome for banks is that their customers start to ignore them because they simply don’t want to hear more bad news. “Oh, it’s my bank telling me that I’ve done something wrong. I won’t pick up / open the envelope / check the email.” Then the bank has lost almost any opportunity for enhancing the customer relationship.

As a quick aside, TD Bank recently hit a home run with a campaign that went viral as it thanked customers in the most personal way possible. 4 minutes, 11.1 million views as of September 1; check it out on Youtube:

What can your bank do to be a coach instead of a scold?

Wearables – banking hype or opportunity?

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Aug 28th, 2014

Lately there has been much fanfare around wearables. From Google Glass to smartwatches, there has been no shortage of press releases, articles and hype surrounding these devices. I must say that I personally find all of this stuff amazingly cool, and love trying out new things. I am also super excited about the Moto 360 smartwatch and will likely pick one up when it launches. My interest in these devices however has absolutely nothing to do with banking. Don’t get me wrong, I think it’s critical for banks to try out new technology in order to understand how devices are evolving and how consumers will use them. In other words, banks should proactively throw stuff against the wall in order to see what sticks! Will wearables be the next big “channel” or consumer touchpoint? I have a hard time believing that consumers are going to want to “bank” using these devices – there is a lot of hype here that needs to be filtered.

Wearables, specifically smartwatches, will act as more of a companion to a smartphone. There are however a couple of specific areas where wearables can have an impact on banking:

  • Alerts and notfications. The alerts that pop up on a watch should in theory be the same ones that appear on your smartphone. Most day to day banking alerts may not be that critical, however there are some that the user may want to have access to at a glance. Security at the point of sale is also a possible use case. If a credit card is swiped an alert can be sent – it’s simpler and faster to have this appear on your wrist then in your pocket.
  • Authentication. These devices, particularly the smartwatch, represent an interesting authentication alternative. The Android platform can be configured to allow for a “trusted device” to unlock the phone or an app. In other words, the phone or app can be unlocked if the device detects the presence of a smartwatch. If the device is lost or not in the hands of the user, the smartwatch won’t be detected and the user will be prompted for a password. The Moto X smartphone currently has this software feature incorporated into its build of Android, and it can be used to unlock the device. Celent believes that devices like the smartwatch can act as a solid form of authentication and enhance the user experience. Additionally, banks have been challenged to come up with new methods of providing authentication for mobile banking, particularly since classic multifactor authentication involves something you know and something you have.

The mobile world is rapidly evolving and there is much to look forward to. Please weigh in with your thoughts and comments.