Recently, during a discussion with a bank representative from one of the banks working with my company, I was asked how the Apple Watch would impact digital banking, and whether banks should invest in wearables and smartwatch banking apps.

Here are my views on this topic:

Over the short term, smartwatches and wearables will not have a major impact on retail digital banking, because smartwatches face obstacles that result in less of an immediate impact compared to smartphones.

The most important obstacles are:

• Smartwatches are dependent upon a smartphone for a data connection and hence for most of their functionality; moreover, many smartwatches are simple companion devices to smartphones.
• Wearables are still suffering from a perception problem: consumers don't yet understand how a wearable might really benefit them, and people have yet to see the point of these devices.
• Other barriers include small screen size, clunky style and a limited battery life.

However, over the long term the rise of wearable technology looks inevitable, and I believe that in the long term wearables - and especially smartwatches - will have a significant impact on retail banking. Smartwatches will become fully connected, standalone devices with more robust functionality, and will no longer need to be tethered to smartphones. On top of smartwatch innovation, battery life will increase and usability will improve. This will result in a significant increase in market adoption and usage.

So my recommendation for banks is: because of the long term trend described above, and also to avoid being overtaken by competition, it is my belief that banks should incorporate smartwatch banking apps into their retail channel strategies, and enter into the wearable technology market through a "test and learn" approach.

Smartwatch apps can also offer short term benefits to banks: they enable banks to position themselves as innovative and engaging to younger customers.  Banks can also use smartwatches as a new marketing and touchpoint with a “wow factor” for their customers. It is no wonder that a number of banks, e.g. Deutsche Bank, Barclays and Moven, have already incorporated smartwatch apps into their banking services.

Would you agree with my assessment?