Financial Wearables – Part 1: Can high-tech wearables solve underserved people’s financial problems?Alissa Saoutina |
Does knowing how much you slept last night help you sleep better tomorrow if your rent is due and you are $200 short?
Probably not. In the U.S., today’s financially underserved have only a few, very expensive options to come up with that missing $200 or face eviction. One of them is payday loans that cost underserved people sometimes double the amount of the principal.
Other options that only people with credit accounts can take advantage of—such as cash advance—will exact higher fees. Rainy day funds are not a “nice to have,” they are “must haves” for people with unstable income, poor living conditions and dependents. In a country with one of the highest income per capita ratios, 76 percent of Americans are living paycheck to paycheck. Saving for a rainy day is practically impossible.
This is where wearable technology comes in. Its popularity has recently erupted from tracking your steps, to tracking hours slept, to exact caloric and nutrition intake of your beverages (Vessyl). I think the success of those little gadgets is taking everyone by surprise—people are abandoning mystery for history in the search for a “quantified self”, or the exact figures and facts about their life.
People are realizing that quantifying their activity does not necessarily improve the way you manage that activity. As stated above, being financially underserved can be expensive no matter how you manage it. Managing money without a bank account is taking your paycheck and handing it off to all the middlemen. Managing money in cash is time consuming—time to get cash, calculate it, record your every transaction. Banks do most of those actions, but do not teach you how to spend better and save money at the same time. The potential power of wearables is not in presenting you with “transactional information” about how many steps you took on a given day, but rather in showing how you can improve those steps over time with alerts, recommendations and visual elements. Banks could use the “wearables” power to incentivize users to better their financial health, deliver liquidity management tools and foster strong banking relationships and maximizing customers’ assets instead of their fees. It not only helps individuals but the bank as well.
As the US Financial Diaries show, the common denominator of various families and individuals across the country is lack of a strong savings opportunity and incentive. However, amounts as small as $5 a day put away in a piggy bank can make a big difference when a boiler cracks or a car breaks down. A number of tech startups address the savings incentive and help people analyze their money. These solutions are new and their outreach is limited. They also rely on you being part of the financial system.
So, the optimal solution is straightforward—the combination of an accessible way for families and individuals to enter the financial system and the tools that will help them save and build their wealth. Wearable tech has a part to play in this scenario.
This is the first post in a series examining the intersection of wearables and financial services. Check back for future posts that will delve into specific ideas on how the two can improve the daily financial lives of people.