Dawn of the Wearables

We live in an era where Fitbit can monitor our health, Uber can track the location of our Apple Watch to send us a car, apps can measure how well we’re sleeping, and computer chips implanted in our brain can allow to us to control robotic arms simply with thought. While not as evident as some other technological revolutions, wearable devices are becoming an established part of our everyday lives. Still, they are not yet commonplace in the world of finance.

The health and fitness industries are the main markets driving the development of wearable devices today. From wristbands to health awareness kits—and even sports apparel—there is a wide range of devices available for tracking the well-being of users.

One of the factors behind the success of health and fitness wearables is regulation. Wellness wearables do not require healthcare authority certification and authorization, so the development of devices in the sector has not been constrained by unnecessary red tape, says Saverio Romeo, principal analyst at consultancy Beecham Research.

According to Romeo, the impact of these devices on wellness has been largely positive. In the past, wearables might only have been used by the most health-conscious users; but, increasingly, healthcare projects around remote-patient monitoring and awareness are creating greater interest among the general population.

Adoption 

“Virtual reality headsets that show different graphics will give people in the finance industry who are thinking strategically a different perspective on the data that they look at.” Angela McIntyre, Gartner

But while the adoption of wearables in the health industry is expanding rapidly, innovation in the financial markets has been slow. That said, Barclays has a contactless payment bracelet; Wells Fargo has a virtual reality game called Oculus Rift that’s designed to entertain customers, though no financial products are delivered through the device, as yet; and Spanish banks La Caixa and Banco Sabadell have both trialed apps for Google Glass to display branch locations. “Other than that, we have not seen any major applications beyond enabling contactless payment via wearable devices,” Romeo says.

Even though the uptake of wearables in the capital markets to date has been almost non-existent, that doesn’t mean it won’t ever play a role in the space. Already, firms are looking at the idea of monitoring the stress levels of traders in order to estimate the best moment for making investment decisions. Wearables can also be used to expand the number of research inputs a trader can look at simultaneously. And there could also be security use-cases—and security challenges—for these trendy devices.

This feature looks at some of those possibilities, in addition to how wearables and the Internet of Things (IoT) intersect, and the challenges facing the wearables community when it comes to cracking the capital markets. 

Monitoring Human Performance

In order to assess whether traders can use wearables to optimize their performance, it makes sense to look at the potential of these devices for measuring the conditions for decision-making.

If Fitbit can help a runner plan workouts based on how long they can run, it’s entirely possible that a similar device can monitor a trader’s well-being so they can trade optimally. There is some correlation between stress levels and the decision-making process that a trader might go through, but measuring stress is not easy, says Angela McIntyre, a research director covering the wearables industry at research and advisory firm Gartner.

“There are indirect ways that you can measure a person’s heart rate. For example, maybe how much they’re perspiring, maybe even their brainwaves, to tell if their brain is in a calm or agitated state,” McIntyre says. However, she acknowledges that people react differently to stress; some perform badly under pressure, while others thrive. But through this, one could potentially create a baseline for optimal conditions for a trader.

Another barrier—and this one is key—is privacy, adds Beecham’s Romeo. How much oversight an employer has of an employee is a contentious and emotive issue. “There has been the idea to monitor vital data of brokers in order to estimate the best moment for taking decisions. I have seen different sorts of devices with this idea in mind, but I am not aware of any implementation. That is because measuring vital data of employees can have privacy issues,” Romeo says.

The Internet of Things

For some firms, the separation of the workplace and employees’ private lives means that monitoring stress levels can be difficult. However, Richie Etwaru, former cto of UBS Wealth Management in the Americas and current chief digital officer of IMS Health, a technology company serving the healthcare industry, says there is potential for wearable devices to be useful if they are paired with Internet of Things tracking devices, such as those used for recording information about employee’s stress levels and sending that data to another device to assess their mental well-being. Having a conversation about wearables without looking at IoT could potentially limit the way such devices come to the market, Etwaru says.

“When we think about wearables, IoT sensors are essentially at the core of the invention. These are miniature sensors that can be put on the human body or into an environment to measure key performance indicators of the real world,” he says.

Ultimately, wearables could become another data source for traders in financial markets, in the same way that places like Yelp or any sort of review website is a data source, says Josh Lifton, founder of startup funding platform provider, Crowd Supply, who studied wearables at the Massachusetts Institute of Technology (MIT). In future cases, texts and tweets, heart rate and the songs people are listening to will also be incorporated into the data being collected.

“I think that’s just an incremental, evolutionary step, whereas sensing the body and using that data is more of a quantum leap; that’s more of a revolutionary step,” he adds.

Wearables You Can Trade With

Other types of wearables that rely less on IoT and more on human interaction with technology, or in this case, mini-computer interfaces, include headsets for better visualizing stocks and smart watches that trade stocks. For finance, there are still use-cases that go beyond testing stress levels and monitoring trader performance.

Gartner’s McIntyre says she has spoken with clients about using virtual reality headsets in order to visualize stocks and markets better. “Virtual reality headsets that show different graphics will give people in the finance industry who are thinking strategically a different perspective on the data that they look at,” she says. 

Another use-case, McIntyre says, is being able to do stock trades from a smart watch, like an Apple Watch, for example. “The banks that I talked to are thinking about how they can engage with their customers through a smart watch, because they view smart watches as mostly consumer-type devices,” she says. “Having their customers able to make trades, or check a stock price or view their account balance on their smart watch, instead of on their phone, is the type of app that companies are thinking about.” 

For example, Fidelity has a mobile app for Apple Watch, with real-time updates on price quotes and news on what various companies are doing. In evaluation of wearable devices, Apple Watch is currently at the helm. “The Apple Watch has driven the smart watch segment,” Romeo says. “But again, the key focus is on personal well-being—and also some attempt to become a smart-home solution.”

And to revert back to the IoT play involved with wearables, the data created from these devices could—in theory—be used to better understand consumer practices, McIntyre adds. With that data, companies can get a better idea of how individuals spend their time during the day, “whether they’re at work, walking to and from places, riding in the car, or at the gym,” she says. “They could correlate that type of activity with when a person accesses information about their stocks or their portfolio, when they make a trade, or other types of transactions and learn about user habits, and then customize the information of the user-experience for that person,” McIntyre says.

As an example, she says, if a person typically does a trade at around 9 a.m., the company receiving the data can give suggestions or send reminders to the trader. “If they know what their habits are, then they can maybe give them information when they’re most likely to want to use it,” she says.

A Question of Safety

At the beginning of February this year, the Director of National Intelligence, James Clapper, confirmed that national security agencies will use IoT to collect intelligence. With any new technology device, security is going to be a concern. Experts who Waters spoke with said that security related to wearables isn’t a critical issue, unless the data collected by these devices becomes valuable to certain parties. 

The companies that manufacture fitness trackers are not preoccupied with security—they care more about growing their user-numbers, according to Bogdan Carbunar, a professor at Florida International University. “It’s obviously important to be concerned about privacy issues, but there are many places where we already leak a lot of personal information,” Carbunar says, noting that most hackers are more interested in employee emails than fitness credentials. But, if the value of that information changes, he says, then there are vulnerabilities that can be exploited.

Fertile Ground

As much as technology is a driving force in today’s financial markets, humans are still integral to the process; the market-makers and technology need to work together to solve problems. Wearables allow humans to discover more about themselves and become smarter, more efficient beings. There’s no reason to believe that this can’t be applied to the craft of trading, as well.

The wearables market is still in its nascence, according to Crowd Supply’s Lifton. He compares it to the internet, which in the public sector has taken a good 30 years to truly blossom, and it’s still improving. “The real potential of wearables and the Internet of Things hasn’t even been scratched,” he says. “Most of the things I see with these devices don’t seem that interesting. The question in most people’s minds is: ‘Why do I want that?’ I guess its time is yet to come and there’s a lot of fertile ground to be plowed here.” 

Salient Points

• The wearables market is in its nascence, so it’s hard to tell just how this new breed of technology will fit into the capital markets space.
• At present, there are more use-cases for wearables in the healthcare industry, although there are possibilities of monitoring traders’ heart rates, trading with specialty glasses or watches, or improving research capabilities. 
• Wearable devices still need time to develop in order for their real potential to be discovered.
• Security for wearable devices is not a critical issue at present, although this might change if the information being collected becomes valuable to certain parties.