Bank On It
Weve all been there: youre winging away on business when you remember your credit-card bill is still sitting, unpaid, on your desk at home.
Or a coveted stock is about to hit your strike price, but youre on a fourth-grade field trip with your child.
Or youre about to sign a check for the house of your dreams but wonder, did that last deposit get made?
In todays world, youd probably pay Visa a late fee, miss out on your stock or race to the bank to cover your check. But in a wireless world, your Internet-enabled cell phone or personal digital assistant would allow you to handle such financial urgencies at once, no matter where you are.
Keeping situations like these in mind, banks, brokerage houses and communications companies are launching wireless financial services and offering deals they hope will lure more consumers into managing their money on the move. Still, technological, security and privacy issues remain, and acceptance is far from universal.
"Supply is there," says Edward Kountz, senior analyst at TowerGroup, a Needham, Mass., research and consulting firm. "The question is, where is the demand?"
Wireless financial offerings are still in their infancy, most experts agree. While a few pioneering institutions offered mobile services in the mid-1990s, most have launched their services in just the past two years, and the customer base remains small.
By the end of 2000, there were, by Kountzs estimate, about 500,000 American and Canadian users of wireless financial services, vs. nearly 3.9 million in western Europe and 4.8 million in Asia. In the U.S., users tend to be active securities traders, tech-savvy professionals and those who like the convenience.
But just as Automated Teller Machines and Internet banking gradually won over American consumers and the financial industry, most experts see the popularity of wireless banking and trading blossoming over the next few years.
Financial institutions are divided between the go-getters and the cautious. Some are "early adopters who really want to stay out front, who feel services like wireless will really help customers," says Jason Gilbert, who heads up wireless development at Digital Insight. The company specializes in helping small- and medium-sized banks create Internet-based offerings. "Then there are those who know its going to become important and are waiting to see where this industry goes."
Its going to go sky-high, those in the business predict. "Its fair to say [wireless finance] is on the tail end of what one would call emerging," says John Shepley, vice president, financial services at Aether Systems, a wireless and mobile data company. Theres some hedging on when, "but nobodys questioning its really going to take off."
Celent Communications, a Boston consulting and research group, estimates that the number of wireless financial services users in North America will skyrocket in the next few years. Celent estimates the number will grow to 1.3 million this year, 2 million in 2002, 6.2 million in 2003 and 13.4 million in 2004. Those customers using wireless trading services will grow from 195,000 this year to nearly 2.7 million in 2004. North American use of wireless for bill paying will increase from 200,000 this year to 2.5 million in 2004.
TowerGroups Kountz is even more bullish, predicting some 35 million North Americans will be registered for wireless financial services by 2005, although not all will be active users, he says.
At present, the mobile wireless Internet is a far cry from the Web consumers can access from the desktop. Basic cell phones, with their tiny screens and alphanumeric keypads, are best used for simple "point-and-click" tasks like checking account balances or getting stock quotes, not for reading a stock research report.
Other wireless devices, though less widespread and more expensive than phones, are easier to use for Internet access. These include Wireless Application Protocol (WAP) phones with expanded displays and PDAs, like Palms handhelds, Handsprings Visor, various PocketPC handhelds as well as devices from Research In Motion.
"What were seeing is a number of devices that are good at doing certain things," says Mark Desautels, vice president of wireless Internet development at the Cellular Telecommunications & Internet Association in Washington, D.C.
The vast array of devices means financial institutions must continually evaluate and expand the platforms their customers can use. For instance, Charles Schwab & Co.s PocketBroker wireless service launched in June 2000 on Palms handheld devices, added RIM handhelds in July, and then moved on to AT&T, Nextel and Sprint PCS phones through the fall.
Perhaps the biggest concern of financial institutions and their customers is the security of wireless transactions. Application providers and phone companies say fears are groundless.
"I am completely unaware of a single complaint or question from a customer on security," says Bryan McCann, Sprints vice president for wireless data services. When Sprint hooks up with its partners, both sides use Secure Sockets Layer encryption.
Some people worry financial data could be intercepted at the "WAP Gap" the split-second when the wireless carrier converts data from SSL. "Absolute nonsense," says Tarek Fouad, chief executive of SensCom, a mobile banking services company. The gap, he says, lies safely behind the wireless carriers firewall.
Arcot Systems has developed security software using what it calls Cryptographic Camouflage. Its 5-kilobyte applet can be downloaded to a PDA in less than 30 seconds; a cell phone version should be available soon. While the user needs only a personal identification number to access information, the level of security is equal to that obtained through hardware or smart cards, says Mats Nahlinder, Arcots vice president of business development for wireless.
If the experts are right, American consumers stand at the edge of a new mobile economy.