Wireless Internet banking is the next big thing in e-commerce. It's a bona fide revolution. So say those who see the future more clearly than the rest of us - the market research firms.

According to one firm, 40 million customers worldwide will be accessing their financial accounts over wireless networks by 2003. Another says the number of Internet-enabled mobile phones will exceed the number of Internet-connected PCs that same year. Still another predicts one billion mobile phone users by 2004, including approximately 600 million wireless Internet subscribers. (For the record, the last two sources were mobile-phone manufacturers Nokia and Ericsson - not exactly disinterested third parties.)

The message is clear: Bankers had better get on the wireless bandwagon. Our customers are going to demand wireless Internet banking via mobile phone or personal digital assistant or some hybrid device. At first they will perform routine transactions like checking balances, paying bills, and transferring funds. And soon they'll be whizzing around the wireless Web, using microbrowsers to initiate stock and securities trades, manage their financial portfolios, and enjoy other value-added portal services such as, well, who knows? The sky's the limit.

The next step, obviously, is wearable computers. Don't believe me? The military has been perfecting techniques for translating movement in a weapon operator's eye and interpreting those minute electronic impulses charging through the human brain as the signal to fire. That's where banking is heading. A simple retinal scanner in your designer eyeglasses will do it. Think "E-Trade" and you're connected. Think "sell S1" and off the order goes.

If the mind-reading bit sounds absurd, I agree. In fact, it is just as ridiculous a notion as that wireless Internet banking is an economically viable business proposition.

It has been more than 20 years since telephone banking was introduced. (On a personal note, I remember the enthusiastic responses of focus groups saying they'd pay $3.00 a month for the telephone bill-paying service. This was back in 1980). Today, our years of effort to induce customers to use telephone-based services, including bill payment, has produced a hardcore base of about 3% of potential users.

What this tells me is that it matters not if it is tethered to the wall or dangling out of sight on your belt, the telephone is an ineffective data-input device.

The banking industry has had customer-accessible telephone audio response systems for 15 years. Banks have offered seven-day-a-week, 24-hour manned call-center service for the past 10 years. Faced with these hard truths, maybe the market research firms can tell us just what unfulfilled service demand is being facilitated by the latest WAP-driven mobile phone banking service. Can they? If customers want to conduct banking on the telephone, they can do it right now, through myriad access points.

Then there's the issue of reliability. The ragged service record of Internet service providers and the communication suppliers, coupled with internal automation deficiencies, has led to poor success in completing orders. Let's lay this problem on top of the notorious problem of poor quality or dropped calls in cellular networks. Now imagine encouraging customers to perform a transaction that actually needs to happen immediately, such as a stock trade, using a service that depends on a wireless infrastructure. From a banker's perspective there is too much potential, and too many ways, to displease customers. And where is the liability for failed execution?

When I read the wildly aggressive predictions for wireless banking, I am reminded of what one of my professors called the "Chinese Marketing Fallacy." Just because there are one billion Chinese it does not follow that you can sell a pair of shoes to 10% of them. In the case of Chinese peasants, they can't afford $100 Nikes. In the case of the wireless banking services, the vast majority of bank customers do not want nor need them.

Why then are bankers announcing that they too have wireless services? Because they know that such leading-edge services will appeal to a few of their most profitable customers. Rather than risk losing these customers to the competition across the street or at the next Web site, bankers opt to invest heavily in these new technologies.

The ultimate irony may well be that these latest costly investments, concentrated on such a small base of customers, will eventually turn the most profitable segment into just another marginally profitable group of customers - without adding even a single bit of useful service.

Mr. McGrath is managing partner of Bank Earnings International in Orange, Va.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.