April 14, 2024
Find Out How Wearable Devices Can Help You with Your Finances

Tech such as smartwatches do more than support your physical goals — they can play a key role in personal finance management. Wearable devices can track your spending, pick up on financial trends, and help you set daily, weekly or monthly budgets.

Let’s explore the state of wearable technology and how it is evolving to develop important finance tools. Because wearable devices can sync with apps across a range of devices, they can act as a control panel to access financial information and insights 24/7.

What are Wearable Devices?

Wearable devices can include smart watches, jewelry, virtual reality (VR) glasses and other types of accessories.

Many of these devices have the same functionality as a smartphone. They have built-in communication capabilities, a range of apps, and have sensors to track things like heart rate, step counts and location.

They are known for supporting fitness and health. However, with the development of new and more sophisticated apps, wearable technology can provide a wide range of functionality, including personal finance management.

How Wearable Devices Improve Money Management

Wearable devices can lead to better finances in several key ways. These include mobile payments, the ability to track spending, access to budgeting tools and trend analysis.

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Wearable devices allow users to make payments in stores, restaurants, bars and anywhere else that accepts contactless payments. You wouldn’t need to carry around a debit or credit card that you could potentially lose or fumble with your smartphone to open the necessary app. This effectively turns a smartphone, for example, into a digital wallet attached to your wrist.

Wearable devices use near-field communication (NFC) technology to power contactless payments, allowing transactions to be made with a simple tap. Wearable technology offers three main benefits in terms of mobile payments.

  • Convenience – The portability of wearable devices makes them a convenient option for making payments on the go. They remove the need to carry cash or cards, and you don’t have to rely on your smartphone, which could be dead, not have service, etc.
  • Speed – Because payments are completed with a single tap, a wearable device payment can be quicker than cash transactions or “chip & pin.”
  • Security – Devices are typically protected by biometric authentication like fingerprint or facial recognition.

2. Track Spending

Just like on a smartphone, banking apps can work on a wearable device. That allows users to quickly check their spending and receive notifications whenever money leaves their account. It can notify you immediately if an unexpected or fraudulent payment takes place — and you can jump into action.

3. Budgeting

Finance apps like Revolut make it easier than ever to manage your spending and set budgets, which can help save money over time.

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Users can set individual budgets for things like groceries, online shopping or anything else they aim to pinch pennies on. The app will then send notifications if you are close to hitting your budget limit, preventing overspending.’

4. Identify Trends

Finance apps installed on your smartwatch or other wearable device can also identify trends and generate analytical reports. These insights allow users to make decisions that help them save money and avoid spending too much.

For example, the apps may tell you that you are spending an excessive amount of money on coffee, or that the cost of going out to eat several times a week is not sustainable. This allows people to make lifestyle adjustments that will prove beneficial in the long run.

The Role of AI

Artificial intelligence (AI) plays a significant role in providing innovative features within wearables and finance applications. AI algorithms analyze financial data such as spending habits and monthly income/expenditure. This provides personalized insights and suggestions for better money management.

These algorithms help power functionality such as:

  • Tracking – AI can automatically track transactions, providing updates in real time and analyzing spending patterns to provide a detailed spending summary.
  • Budgeting – It can also create budgets and deliver alerts should you come close to blowing said budget.
    Financial Wellness – A popular feature of AI-powered financial applications is insight into a person’s financial wellness. This includes highlighting how a person can make adjustments to save more money each month or acknowledging positive changes that have reduced their outgoings.
  • Investing – Most wearable devices that integrate AI allow users to connect with investment platforms to evaluate market trends, monitor their portfolio or even make trades in real time. AI can also provide recommendations to help people make an informed decision on their next investment or trade.
  • Manage Debt – Like budgeting algorithms, AI can also improve debt management by suggesting suitable repayment strategies and issuing reminders whenever a payment is due.

Such features can prove invaluable for people across the U.S., where the average FICO credit score is only 716. There are several reasons why this is the case, but not-so-hot personal finance management is one of the main culprits. It also stems from other issues — a lack of accessible, easy-to-use financial management tools. And that’s where tech wearables come in.

Challenges of Wearable Technology

Privacy and security remain the most obvious hurdles for wearable devices and finance management, especially in terms of data collection and its misuse. This is because large amounts of personal data need to be processed for mobile payments and money management features to work. Meanwhile, always-on functionality creates a sense of constant monitoring, which not everyone is comfortable with.

The skepticism isn’t going away anytime soon, as the population becomes increasingly more concerned about identity theft and online fraud. These manufacturers potentially have access to everything from browsing data history to information regarding a person’s investments or offshore banking accounts. This means a data breach could be disastrous.

Also, some applications only are designed for Android and others for Apple, while some may be reliant on a Bluetooth connection.

Using Your Wearable to its Full Potential 

When most people think of wearable technology, they think of fitness tracking and health monitoring. However, this is just the tip of the iceberg. One key use of wearable devices is personal finance management, supported by secure, AI-powered apps.

These apps can allow users to make payments, assist them in budgeting, track and analyze spending and more. Although privacy and security remain an issue for some, data protection and cybersecurity have come a long way.

New York contributor Kiara Taylor specializes in financial literacy and financial technology subjects. She is a corporate financial analyst.

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