All the flagship iPhones released over the past four years have FaceID for authentication purposes. However, in the current situation when almost everyone is wearing a mask (when outside), it has become difficult to unlock the iPhone or authenticate purchases. To solve the problem, Apple is reportedly working on allowing users to unlock their iPhones seamlessly when they are wearing their Apple Watch on the wrist.
A report by Pocket-lint notes that iOS 14.5 beta which was released recently packs the feature of unlocking an iPhone with the Apple Watch. The feature uses the Apple Watch as an authentication device to unlock the iPhone based on proximity. The new update if it makes it to the final release will reduce the problem people are facing when unlocking their iPhones while wearing masks.

Already works on the Mac
A similar feature already works on the Mac, users when wearing their Apple Watch are not far from their Mac, will unlock the Mac without requiring password or TouchID (on latest models). Users are notified of the unlocking process with a slight nudge on their wrist by the haptic feedback system on the Apple Watch. For the whole process to work, the Mac and the iPhone (in the future possibly) must be in close proximity to the Apple Watch linked to the same Apple ID.

The feature, while interesting, does not always work seamlessly on the Mac, according to some Mac owners. It will be a challenge for Apple to make sure that the feature works perfectly on the iPhone. It is yet to be seen if the company will pack the feature in the final iOS 14.5 update or delay the release or completely dump it altogether.
Apple is also reportedly working on bringing back TouchID to the iPhone by packing in-screen fingerprint readers on the next flagship iPhones.