An era is dawning for wireless banking in the United States. The prerequisites-workable and rapidly progressing technology, coupled with a marketplace of time-starved Americans-clearly are in place today.

Yet consumers who are willing to bank on wireless remain a rare breed. Will their numbers grow quickly into a dominant force, as some in the industry believe? Or, in the short term at least, will mobile banking generate only limited interest and impact?

ESO FAR, SO SMALL

Currently, Web-enabled phone users are in the minority, and two-thirds of digital cell phone users are unlikely to upgrade in the near future, according to Forrester Research, based in Cambridge, MA.

Still, as outdated equipment wears out, buyers increasingly will have but one option-to embrace the new technology. In the not-too-distant future, this shift to more capable devices will become noticeable, says Virginia Philipp, senior analyst with TowerGroup's Mobile Financial Strategies Research and Advisory Service, based in Needham, MA. "It's a very slow migration process, but it will happen," she says. "By 2003, we are going to have a lot more people with Web-enabled devices."

By the end of 2003, predicts Stamford, CT-based Gartner, 107 million Americans will own a Web-enabled cellular phone and 8 million will have a Web- enabled PDA.

Projections for mobile (or "m-") commerce are equally optimistic. By 2005, the value of financial transactions completed via mobile telephone will reach $50 billion, Boston-based Yankee Group predicts.

To reap those future benefits, the banking industry needs to position itself now. And, in increasing numbers, banks are entering the wireless realm. One goal: to retain high-end customers. It's presumed that if a bank doesn't support the latest advances, including wireless banking, customers will go elsewhere.

But research by Forrester contradicts this logic, says Cathy Graeber, a senior research analyst there. She sees wireless banking as evolving; it doesn't necessarily need immediate attention. "I think it does serve a small niche, and that niche will certainly grow over time. But does every bank have to have a wireless offering right now? Forrester would say no."

Still, banks are boarding the wireless bandwagon. They include Citibank, Wells Fargo, Bank of America and even Chicago-based Harris Bank, a subsidiary of the Bank of Montreal, another leader in wireless. As a standard service, banks provide customers wireless access to account information; they commonly offer alerts, bill paying and fund transfers as well.

Who among today's banking customers wants to use the technology? Only a small number, according to Forrester. While research shows that 35% of U.S. households are "at least somewhat interested in mobile data services," that interest drops when it comes to banking. When asked if they would use wireless services to monitor bank balances, only 40% of that 35% said yes. And a mere 30% would transfer funds via wireless devices.

Today's Internet-enabled phones and PDAs may deserve at least part of the blame. Cumbersome, slow equipment poses problems, Philipp says. She adds that the cost of both devices and services also is prohibitive to most consumers.

Giving away devices to coax bank customers into wireless may be unnecessary though. Carriers offer customer incentives, and banks are able "to ride on top of that," says Herb Paquette, vice president of brokerage applications for 724 Solutions Inc., a Toronto-based provider of Internet software that specializes in mobile transaction applications.

As he sees it, wireless banking enjoys a loyal following. Among higher- income, mobile professionals, such services are gaining in popularity. The numbers may not be huge, but Paquette says the key factor involves who's using wireless. "They are the 20% who generate 80% of banks' profits," he says.

For the technologically timid, incentives offered by banks can be beneficial, says Jennifer Schmidt, analyst at Meridien Research in Newton, MA. As an example, she points to a Web-enabled cell phone giveaway by The Woolwich, a top financial institution in the United Kingdom. As part of the promotion, each Woolwich branch had a demonstration model on hand, and customers reacted positively. "They weren't so afraid of the new technology," Schmidt says.

ECHALLENGE AND CHANGE

With the addition of wireless channels, banks must ensure a consistent user experience, Forrester's Graeber warns. What people want is "a real integration between channels," a system that always works for customers whether they bank with wireless devices, over the wired Internet or in person. "Today, a lot of those technology platforms are very different," she says. "And they don't talk to each other."

Wachovia Bank, based in Winston-Salem, NC, is addressing the standards issue through its Connection Plus program, a Web-based solution that targets corporate financial clients. The program is designed to run efficiently across multiple delivery channels, including wireless, providing a central repository that processes transactions and information.

Implementing it has been daunting at times, says Laurence Leinbach, vice president and electronic access line manager in Wachovia's treasury services division. One major obstacle is the lack of national standards in the wireless industry. "Not only do we have to support multiple carriers," he says, "but each carrier has its own devices, which means we have to support multiple devices within each carrier."

To be sure, virtually all businesses with m-commerce strategies want to make the "wireless experience" pleasant for consumers. But, it often involves a detour into "dead space" that keeps wireless users from enjoying the ride. Whether they are driving for miles or taking a few simple steps, customers endure irritating dropouts. That doesn't bode well for bank transactions.

Systems are emerging to circumvent so-called dead space. iAnywhere has teamed with 724 to develop an "always available" application that provides a queue for information during transactions. So, for instance, if a user encounters dead space and receives an alert from the bank simultaneously, the alert will be posted as soon as coverage resumes.

For banks, customers and wireless partners alike, security remains a prime concern. But, according to Philipp, those fears often are unwarranted, at least in the United States Necessary or not, applications to prevent technological break-ins on wireless transmissions are growing in number and sophistication.

In February, 724 Solutions introduced its PKI Gateway, a privacy and security product designed for high-value financial transactions. For the venture, 724 teamed with software providers Certicom Corp. and Neomar Inc. Users can digitally sign documents that contain sensitive information, such as a mortgage application, and safely transmit these "legally signed papers" back to the bank.

EA MATTER OF TIME

Although technogeeks are today's primary target market, the future of wireless banking rests with a much bigger audience, one that will see these services as an integral part of life.

An obvious shift in coming years will involve today's "youthful market." This younger generation is growing up on the Internet, and they are fearless about wireless communication and devices. Yet, because of the younger group's limited spending power, banks largely overlook it.

That may make sense in the short term, but it could hurt banks later, Forrester's Graeber says. Young consumers, unlike their parents, are highly influenced by technology and lack their parents' loyalty. For them, brand recognition is directly tied to the Internet, she says. If banks ignore them now, these young adults could go elsewhere when they possess the means to be "good, profitable customers," she says.

Immediate delivery is a primary advantage of wireless, and it holds promise as a strong selling point for banks. Wireless alerts about time-sensitive information constitute a valuable service to consumers, Graeber adds. "How many people really need, on a regular basis, to transfer funds in the middle of the day, and they can't get to their PC or regular phone?" Alerts, on the other hand, give a customer an immediate opportunity to "take action to benefit their financial situation," she says.

According to Philipp, banks should define wireless strategies by considering consumer wants and needs as they exist today. "That's how wireless banking must develop on the banking side-not just offering consumers tools and asking them to use them, but pushing those tools to the consumer, which will entice them to respond."

Another enticing aspect of wireless banking involves the trend of business mobility-and not simply for long-distance travel. As an example, Leinbach tells of a Wachovia corporate customer who has used wireless to establish a better "work/life balance." This client's child plays soccer at 3 p.m. weekly, but the client also must approve payments beginning at 3 p.m. on game day. A wireless device has provided the freedom to do both, Leinbach says. "Those are the kinds of benefits we're learning about that we never anticipated."

So, will bank customers discover the wonders of wireless and act accordingly?

The time is drawing near, says Gartner senior research analyst Brad Adrian. "During the next year or two, we're going to see providers coming to grips with exactly what they want to provide. And consumers, at the same time, are going to gain a better understanding of what they want."

Thus, despite steady progress down the runway, wireless financial services apparently aren't quite up to takeoff speed. Observes 724's Paquette: "People are trying to sort out their roles."

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