To witness firsthand how wireless technology could change their business, U.S. bankers might consider dipping into their travel budgets.
Though the domestic securities industry is well out in front of banking with stock-trading and related information services on cellular phones, pagers, and personal digital assistants, the bankers might find some international excursions more eye-opening.
Internet-delivered services to personal computers, which have finally gained standard-equipment status with U.S. banks of all sizes, are elsewhere evolving rapidly into wireless mode.
Technologists talk about the likelihood that emerging-market countries, which are not saddled by wirelines and other infrastructure legacies of developed economies, will "leapfrog" to wireless for all communications purposes, including financial services.
But industrialized countries are leaping, too.
"Japan may skip Internet trading and go straight to wireless," said Karin Herrmann, chief operating officer of w-Trade Technologies, a New York-based developer of wireless trading and banking software.
She made that guess based on what her salespeople are hearing. It implies that wireless banking and more are not far off.
"It's definitely moving into banking, and our European customers are most interested," said Ms. Herrmann. "On-line trading started first because that just seems to be the best way to get people interested, but we have been approached about putting other applications-auctions, gaming-on our platform."
"The digital phone is going to be the Internet access device of the future, much more than PCs," said Stefan Roever, chief executive officer of Brokat Infosystems of Germany, a leading provider of payments software.
"In emerging markets, certainly," he added. "It's still leading-edge, but we are doing it. We have some banking customers actually in production."
Mr. Roever's point of view is Eurocentric, but Europe is the current center of this universe for one big reason: GSM, the Global System for Mobile communications standard.
About 150 million mobile phones worldwide conform to GSM. These include virtually all in Europe, creating a climate very different from the U.S. technical patchwork that causes cellular roamers to grumble whenever they cross into an area that their carrier cannot serve.
The U.S. wireless industry has struggled to resolve the differences among GSM, TDMA (Time Division Multiple Access), and CDMA (Code Division Multiple Access). In their recent book "Information Rules," University of California professors Carl Shapiro and Hal Varian wrote: "The U.S. standards battle has delayed adoption of a promising new technology, without any evident benefit in terms of greater product variety."
GSM's ubiquity and high-quality, all-digital connections are taken for granted in Europe. And the standard has been in place for most of the 1990s, long enough for strategists and system developers to get deep into their work without fear of being undercut by the unforeseen.
Parts of Asia have GSM too, but Hong Kong, Japan, Singapore, and other places have taken to wireless more because of their inherent "early adopter" qualities, industry experts say. Citibank, for example, is gaining wireless-delivery experience in Asia that could eventually pay dividends as North America comes up to speed.
This is not to say that the United States is backward in its extension of wireless capabilities. 3Com Corp.'s Palm organizer has spawned a burst of creativity.
Excite Inc., for example, arranged to make its personalized home pages as easily downloadable to the newly released Palm VII devices as to personal computers.
Billserv.com Inc., which provides electronic bill presentment services, is offering to deliver bills to, and process payments from, consumers' Palm VII's.
The Zions Bank Capital Markets unit of Zions Bancorp. in Salt Lake City introduced Odd-Lot Palm, using an earlier-generation Palm III with a Minstrel III wireless modem. It enables bond traders to execute trades of up to $5 million in seconds "without requiring any real estate on the desk"-or without even being in the office, said Zions senior vice president Robert Knox.
Prudential Real Estate and Relocation Services is using the Palm VII to "provide critical information and services to consumers and real estate professionals with the speed, flexibility, and easy access they demand," said Jean Hamilton, chief executive officer of the Prudential institutional unit in Newark, N.J.
In a cautionary note-to competitors-about the perceived power of the technology, she added that Prudential is "looking beyond real estate to use this new technology in the broader financial services arena."
The U.S. credit card industry has made some wireless inroads, relying on cellular-connected point of sale terminals for outdoor and special events.
Not including Dreyfus Brokerage Services, which operates at arm's length from Dreyfus Corp.'s parent, Mellon Bank Corp., two prominent U.S. banking organizations have formally announced wireless plans: Bank of America Corp. and Harris Trust and Savings Bank of Chicago. The latter would be an extension of the Veev program that Harris' Toronto-based parent, Bank of Montreal, began testing in May.
Those efforts are founded on software from 724 Solutions Inc. of Toronto. Like competitors w-Trade and Aether Technologies, 724 accommodates a range of devices and standards.
In other parts of the world, though, the technology is being taken up on a more massive scale.
"Western Europe and Japan are poised to be the market leaders due to their wireless infrastructure and propensity for adopting cellular technology," said analyst Diana Hwang of International Data Corp. in Framingham, Mass. She said she expects that those regions' increasing demand for "hand-held companions" and smart phones will cut into the United States' current 45% share of smart hand-held device shipments.
Whether it is via GSM networks or in national electronic commerce initiatives in Japan and elsewhere, foreign organizations are embracing something else that U.S. bankers might not readily relate to: smart cards.
Computer chips for authenticating cellular subscribers are required by the GSM standard and are often inserted in the form of a smart card. The technology is thus compatible with systems like MasterCard International's Mondex, Visa International's Visa Cash or Visa Smart, and Proton for transmitting account data or virtual money over the Net.
Sun Microsystems Inc. is conservatively estimating that there will be one million Java-programmed smart cards by yearend, almost all of them for GSM phones, said James Mitchell, chief technology officer for consumer and embedded products in Sun's Java Software division.
Mondex International of London has been experimenting with wireless technology for more than two years. Last fall, it joined with the French phone maker Alcatel and the smart card maker Gemplus to create the functional equivalent of an automated teller machine using the chip and a GSM phone.
This year, France Telecom, Motorola Inc., and De La Rue Card Systems collaborated on a banking, transaction processing, and information service. They described it as the first European test of the Wireless Application Protocol, or WAP, a proposed standard gaining de facto acceptance for enhanced over-the-air services.
American Express Co. has developed a GSM banking service with Hutchison Telecommunications in Hong Kong.
Visa GSM cash-loading transactions are a part of the smart card program in Leeds, England, that was a prototype for a national rollout of the technology.
In May, Standard Chartered Bank led Visa, Ericsson, Gemplus, Microsoft, and 10 others into forming the Asia Mobile Electronic Services Alliance, aiming to promote and support a wireless infrastructure in the region.
The alliance "marks a major milestone for the convergence of two powerful emerging technologies, smart card and Internet," said Harel Kodesh, vice president of Microsoft Corp.'s productivity appliance division.
Visa also announced a test with the Finnish cell-phone leader Nokia and MeritaNordbanken Group, making use of Nokia 7110 dual-chip phones and the Secure Electronic Transaction and Bluetooth protocols in addition to WAP. SET is the credit card industry's proposal for Web payment security, and Bluetooth governs short-range radio transmissions, as between mobile phones and other remote devices.
"This may sound like a bunch of technical jargon, but what we are really saying is that customers will be able to jump the queue at retailers to pay, or to access the Internet anywhere to order and pay for goods and services," said Jon Prideaux, executive vice president for new products of Visa's European Union organization. "Personally, I can't wait to be able to use my mobile phone in my car on the way to work to order cinema tickets on-line for my wife, without having to wait on the phone or in a line."
Bo Harald, executive vice president of MeritaNordbanken, pointed out that it has been providing PC banking since the early 1980s and has 700,000 Internet customers enrolled-more than all but a couple of U.S. banks on the Web.
"As our home markets, Finland and Sweden, have the highest mobile phone penetration in the world at over 60% and 50%, respectively, it is natural to further increase the service channels available," Mr. Harald said.
Getting the Internet unplugged to that extent in the United States, and in U.S. banking, may take a while.
"It is still early days in the consumer device area," said Mr. Mitchell of Sun. But he said he foresees "thin-client," Internet-connected devices rising by a factor of 10 in three to five years, and "no one can ignore that."
A few practical matters can be addressed during the interim. Ed Kountz, an analyst at Tower Group in Needham, Mass., said technology developers need to improve battery lifetimes in the more sophisticated hand-held devices, overcome screen-interface limitations, and get prices down to appeal to a more mainstream market. But he said the needed progress is no more than two years away.
"The financial barriers are just not that high," said George Davis, chief operating officer of Aether Technologies, a Maryland wireless systems vendor in which 3Com's Palm Computing subsidiary is a principal investor.
Thanks to computer-world articles of faith, such as Moore's Law and Metcalfe's Law about the boundlessness of microprocessing and communications capacity, no one doubts that any bandwidth problem will be solved. But the fact remains that on-line trading took off so fast in part because it does not require a lot of bandwidth.
Dreyfus Brokerage launched its wireless service a week ago to provide the kind of "instant access to financial information and markets" that historically was available only to the elite, said the company's CEO, Jeffrey Nachman.
Mr. Nachman praised the w-Trade system for being "as good as anything out there today" and for "positioning us well for when the technology changes." But he added, "there is still a question of how much data you can move across the networks. It doesn't move quite fast enough."
"The Internet is somewhat unpleasant on a wireless device," Mr. Davis conceded. "I'm not sure (wireless) can take over completely because of bandwidth constraints. Until the network is as pervasive as wireline, we have to worry about the volumes and security of transactions."
That view changes for the longer term.
"For three or four years there will be a mix, with wireless as a nice, natural extension" of Web services, Mr. Davis said. "Long term, wireless would have to become more prevalent because it is more cost-effective."
Christopher Lochhead, chief marketing officer of Scient Corp., a fast- growing Web consultancy in San Francisco, said a vision of "any to any" device connectivity "will play out over the next couple of years." Providers would have to come to grips with the fact that some services are more appropriately delivered over broadband networks than others.
"Businesses will be on a broadband or nonbroadband basis," he said. "Businesses may be built around bandwidth more than customer segments."
Security is a concern but not a worry. The Passport Certificate Server from Diversinet Corp. and elliptic curve cryptography from Certicom Corp.- both are Canadian technology vendors, as is the prominent pager manufacturer Research in Motion Ltd.-are helping to address the demands of small wireless devices for speedy verification of security algorithms and credentials.
Wireless promoters are quick to point out that their systems have never been compromised and that their approaches have stood up to due diligence by highly regulated, risk-averse institutions.
"Security is actually simplified with a hand-held device," said Lior Arussy, manager of worldwide marketing in Hewlett-Packard's Internet security division, which addresses almost every type of device or system in its Praesidium framework. In contrast to an elaborate corporate intranet, "I do not have to expose the hand-held user to all my resources," Mr. Arussy said. "If I am just delivering e-mail, for example, my exposure is contained to that."
Ajei Gopal, director of architecture and technology in International Business Machines Corp.'s pervasive computing division, warned against complacency. "There is always a danger of saying, 'Let's go ahead, and security will happen,'" he said, adding that user authentication and end- to-end network security are critical.
"An element often mistaken for security is privacy," he said. "That can be much more difficult, a policy issue rather than a technology issue."
John Gage, director of Sun Microsystems' science office, said banks have suffered in the technological age because their top executives lacked hands-on knowledge that would enlighten them about possibilities. He said the Palm VII changes all that, albeit at a $550 price tag.
"For the first time, you can put something like this in senior managers' hands, and they can use it immediately," Mr. Gage said. "You have to use it to get it, and once you get it, you'll come up with ideas for doing new things. All those ideas that have been latent in banking will find a pathway."
