Smartwatches have enjoyed a steady rise in popularity over the past five years. In 2019, 180 million people owned a smartwatch, according to GlobalData estimates. The growth is mostly attributable to the launch of the first Apple Watch in April 2015. Smartwatches still lack the kind of killer use case that would make them indispensable. However, sales are being driven by improving health and fitness applications, the ability to access smartphone content without the need for a phone, and the emergence of low-cost devices.

Listed below are the key regulatory trends impacting the smartwatches industry, as identified by GlobalData.

General Data Protection Regulation (GDPR)

In 2018, the EU’s GDPR forced companies, including smartwatch vendors like Apple, Fitbit, Google, and Samsung, to introduce transparent privacy policies, stipulating the use and purpose of user-generated data. Google’s acquisition of Fitbit, announced in 2019, is also impacted by the regulation, as the European Data Protection Board (EDPB) has raised concerns about the privacy and protection of Fitbit users’ data.

The EDPB believes that this data is at risk of being used by Google for advertising purposes. Although Google and Fitbit have both insisted that customer data will not be used in this way, regulators remain unconvinced, and the takeover could be terminated if the companies fail to reassure them.

The Smartwatch Data Act

In November 2019, the US introduced the Stop Marketing and Revealing the Wearables and Trackers Consumer Health Data Act, nicknamed the Smartwatch Data Act. It imposed prohibitions on the use, sharing, or selling of health data collected, stored, and transmitted by wearable devices, including smartwatches. The act does not prevent smartwatch vendors from gathering consumer data but restricts them from profiting from it.

All US-based smartwatch vendors will be impacted by this act as they will have to stop sharing user data with their business partners, particularly third-party app developers. GlobalData expects Google to be the worst affected, given its heavy reliance on third-party affiliates and data driven advertisements.

This is an edited extract from the Smartwatches – Thematic Research report produced by GlobalData Thematic Research.

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