Now that most major brokerages have given account access to customers through wireless devices, the question remains when banks will catch up.
Banks are clearly eager to pursue this new customer access channel - which, depending on whom you believe, will either be the way people handle their finances in the future, or something of a fad. Most people can see that cellular telephones and handheld personal organizers have become staggeringly popular, and the numbers bear out the empirical evidence: According to Jupiter Communications, there are 20 million wireless devices in use in the United States, and the U.S. wireless data subscriber base will exceed 100 million by 2003.
On Monday, Charles Schwab & Co. announced it was offering its PocketBroker service through wireless handheld devices made by Palm Inc. Not to be outdone, Quick & Reilly, the discount brokerage division of FleetBoston Financial Corp., announced the same day that it was offering wireless securities trading on "virtually every major wireless device." A third brokerage, E-Trade Group Inc., had already grasped at becoming the top financial services company for mobile customers: as part of its "E-Trade Everywhere" strategy, it has signed agreements with GTE Wireless, AT&T Wireless Group, OmniSky, Verizon Wireless, OracleMobile.com, and Everypath, a wireless technology enabler.
Brokerage seems like a natural place for wireless service to take off. It caters to customers who demand speed, and the amount of information they need to convey can be accommodated on tiny screens and limited keypads. But offering full-blown banking services on these devices has proven a tougher task, and banks - perhaps in part because of their characteristic skepticism about new technologies - have held back.
"In banking, we've seen an incredible slowness to adopt this," said Robert F. Granger, vice president of the Internet Applications Group at Interface Systems Inc., a company that converts legacy data for distribution over the Internet and wireless devices. "Brokerage, mutual funds, and insurance companies are faster to adopt it," he said.
But banks are making some progress. Out in front is Bank of Montreal, which became the first bank in North America offering wireless transactions when it introduced a service called "Veev" in Canada last year. In March, it began a pilot at its U.S. subsidiary, Harris Bank in Chicago. In the pilot, called Harris Wireless, it gave Sprint PCS phones to 100 customers.
"The barriers we saw a year ago were that the phones were too big and the screens were too small," said Mark Dickelman, vice president of mobile commerce and wireless for Bank of Montreal and Harris Bank. He said Veev, which gives users full access to their accounts in real time, lets people pay bills and trade stocks, and is tailored to the screen of a phone. The project started with 500 customers in Toronto, and the bank has not announced customer numbers since then.
"This is not about the number of customers, but about enabling a new customer experience and getting it right," Mr. Dickelman said. Being first to market has given the bank "a significant advantage over our competitors," he said.
Royal Bank of Canada will roll out wireless banking later this year, a spokesman said. Large banks in the United States, such as Bank of America and Citigroup, are likely to launch wireless services this summer.
In a pilot that started in October, Bank of America has been feeding account information to its California online banking customers over the Palm VII handheld device. The bank says it will soon roll out transactional services on both organizers and mobile phones. Trace Poll, senior vice president at Bankofamerica.com, said he would prefer not to talk about Bank of America's timeline.
"Some customer segments are demanding this to save them time," Mr. Poll said. In terms of "market visibility," the brokerages have done the industry's advance legwork, he added.
It is not just the big banks and brokerages that are getting in on the wireless act. A San Diego credit union and an Internet bank are also offering services to their customers. The University & State Employees Credit Union in San Diego has made available a service that lets any of its 60,000 members retrieve account balances, review account histories, and transfer money between accounts in real time over wireless phones. The $430 million-asset credit union has hired the technology and service bureau of San Diego-based SensCom Inc. to offer the capability, which will be free to current members for the rest of this year.
USABancshares.com of Philadelphia started offering wireless banking in March, over Palm VII rather than wireless phone. USABancshares is working with Electronic Data Systems of Plano, Tex. One obstacle to widespread delivery of wireless applications in the United States is the lack of a universal standard. In Europe and Asia, wireless phones have been built on one digital standard - the global standard for mobile communication (GSM). The Wireless Application Protocol (WAP) is also a widely accepted protocol for writing Internet applications on mobile phones.
Because GSM and WAP are in greater use overseas, several American financial institutions are testing wireless technologies abroad first before bringing them back to the United States.
"Wireless devices will probably come down market when WAP-enabled phones become more ubiquitous in the United States," said Robert Sofman, senior vice president of the Wireless Solutions Group at Schwab. "We have a multi-device, multi-carrier strategy. Clearly if there were a more common set of standards, this would be easier."
Nasos Topakas, vice president of wireless engineering at Schwab, said that just as the Web began with specialized products, so too has wireless. "As WAP gets more solid, we'll expand our products," he said. But Schwab is not waiting for WAP to become more mature. It is already running a beta test of its PocketBroker - which gives Schwab customers account balances, news, quotes, alerts, and trading - on WAP phones in Hong Kong.
"As technology improves, we'll offer new and improved applications," Mr. Sofman said. "We want to be right in the middle to ride where the industry goes."
The United States must be the "only country in the world where PC penetration is higher than mobile phones," said Alan Young, vice president of access devices and distribution technologies at e-Citi, Citigroup's mobile division. Mobile phone penetration in this country stands at about 27% of the population, compared with about 60% in Europe. "This will change," Mr. Young said. "You'll see an explosion of phones here, and that's good for us. We'll figure out how to use this technology elsewhere first, and then bring it home."
Greg Wolfond, chief executive officer of 724 Solutions Inc., a software company in Toronto that sets up wireless services for financial institutions, said the "level of knowledge and appeal has grown" for his company's services. Bank of Montreal, Citigroup, Wells Fargo & Co., and Bank of America are investors in 724 Solutions.
"The cost of wireless data services is dropping to the floor," Mr. Wolfond said. "All of a sudden we're getting to cost points of about three cents a minute, which make it make sense. It's so darn easy for consumers, they'll do it like they use ATMs."
Mr. Wolfond said banks and brokerages are working in parallel. "They're trying to see what applications clients like."
In April, Fidelity Investments formed a partnership with Sprint PCS to deliver Fidelity's InstantBroker trading and personalized information service to investors nationwide using Sprint's wireless Web network.
While as yet all capabilities do not necessarily run on WAP, "We're well-positioned as WAP gets standardized and implemented," said Mr. Dickelman of Bank of Montreal. "It's like a steppingstone." Mr. Dickelman said he thinks the United States has jumped in front of other countries in wireless Internet service, with about five million devices available and several carriers selling them. "In North America today, we've got strong capability with our existing networks," he said.
Now that most of the world's telecommunication carriers have agreed on a third-generation standard known as 3G, "North America is more strategically placed," Mr. Dickelman said. He said there are also rapid advances in the speed at which data are being transmitted.
"There are a lot of standards and a lot of banks have to make services that run on GSM and WAP-enabled phones," 724 Solutions' Mr. Wolfond said. Although there has been a lot of work done on SMS, he said, "people are excited about WAP potential."
Now real applications are beginning to appear. "Wireless can be a great retention/loyalty vehicle for banks and telcos to give WAP phones to their customers," Mr. Wolfond said. In the United Kingdom, for example, banks such as Abbey National PLC, Bank of Scotland, and Halifax PLC are giving away WAP phones to encourage wireless banking.
"A lot of what we're seeing is messages," said Mr. Wolfond. "But, we're starting to see some transactional stuff, like people getting balances on their phones. Some of the appeal of what we're bringing is that they can get this type of information on any phone."
In Hong Kong and Singapore, Citibank has experimented with SIM toolkit technologies and while "the functionality is very high, it is rather restrictive in terms of a telco operator and the handset you use," said Mr. Young of e-Citi. Citibank's business units in other parts of the world also plan to implement financial information notification/alerts and transactional banking, he said.
Citi has already launched an alert service for its 100,000 customers in Poland. Previously its customers there would call an interactive voice response unit to check their balances. "It was inconvenient for the customer to call and expensive for us to run," Mr. Young said. Now, 60% of its customer base in Poland uses a text messaging service on GSM phones, and this has reduced calls to the call center.
In Japan, where there are more than 48 million registered mobile-phone users, Citi launched a mobile banking service with NTT DoCoMo, NTT Communications' mobile subsidiary, in November. This system allows people to dial in on an NTT Internet-enabled iMode phone in real-time and at any time check their account balances. Last month, Citigroup announced a test in Japan of a consumer payments system for mobile shopping. The new system, which will launch by yearend, will enable consumers to instantly order products by inputting unique product codes into an Internet-enabled mobile phone. Payment and settlement is realized through a transaction gateway that holds the individual's personal shopping information as well as his financial payment information on the phone.
"Phones will be a bigger market than Palms," Mr. Wolfond said.