Second in a two-part series

The United States lags Europe and Japan in the development of standards for wireless Internet technology. Devices are more widely available in those places, and people can do more things with them.

Experts say there is little that U.S. banks can do to catch up right now, given that Wireless Application Protocol (WAP) telephones are not in general use here. They advise banks to prepare themselves, start working with the existing technology, and trust that consumers will want to buy their own Internet-enabled wireless phones once these devices work a little better, cost less, and can pick up more content.

"No consumer in their right mind, unless they're a total propeller-head, is going to go out and say, 'I have to have a WAP phone,' " said Edward Kountz, an analyst at TowerGroup, a technology consulting firm in Needham, Mass.

Mr. Kountz was blunt about it: "Until you start to see the WAP phones cycle into common usage, the question is, What good is WAP? And the answer is, none. If you build it, will they come? No, not until the phones are there."

This does not mean that banks should ignore WAP or the inevitable onslaught of wireless services and applications. "Financial institutions have to have a wireless strategy," Mr. Kountz said. "It's no longer a matter of 'if' but of 'when.' "

Until the next generation of wireless technology is ready, "the question for a bank is, What do you do in the meantime?" Mr. Kountz said. "Obviously, you've got to do something. WAP has been first to market, so there's a significant first-mover advantage" for banks that start offering it.

"I see WAP becoming a necessity for U.S. banks over the next 18 months," Mr. Kountz said, "but I don't think the shelf life of WAP as an end solution is much longer than 28 months, and that's something that financial institutions need to consider."

Banks that do not want to make the investment in-house to develop WAP platforms can of course consult a vendor. One of the leading vendors - or "application service providers" - is 724 Solutions Inc. of Toronto, which has helped Bank of Montreal and its Chicago-based subsidiary, Harris Bank, introduce the largest wireless telephone banking program in North America so far. The service in Canada is called Veev, and was introduced in May 1999. The U.S. service, introduced in March, is called Harris Wireless. Citigroup Inc. has bought a stake in 724 Solutions, and other major financial services firms, including Bank of America Corp. and CheckFree Holdings Corp., have hired the company.

Ian Hobbs, vice president of product development at 724 Solutions, says his company sees pros and cons to WAP but is indifferent to standards and protocols, because it can work with all of them.

"WAP was developed for small screens and limited bandwidth," he said. "WAP has to evolve quickly to be able to support all the types of things that people are going to want to do - it will have to support color, graphics, higher levels of security."

On the other hand, "WAP has a significant advantage in the installed base it has," Mr. Hobbs said. "The devices are out there, all the handset manufacturers already have them. An evolution of WAP would be an advantage over moving to something different in the marketplace."

Mr. Hobbs said banks need to be most wary of developing in-house proprietary solutions that may become obsolete. Although that would seem to be a somewhat self-serving conclusion from a vendor, neutral experts seem to agree.

"From a 724 Solutions perspective, it's irrelevant" whether WAP prevails, Mr. Hobbs said. "For a financial institution, it's a very important point. They don't want to play up WAP if it doesn't make the evolution in the next 12 to 18 months. But there's a huge danger to financial institutions that go out and do their own development, code out a WAP-specific solution. You can't bet on any individual device, you can't be on any individual browser technology."

There are also holy wars raging between advocates of smart phones and of personal digital assistants. The Palm Pilot crowd point to the success of online brokerages, whose customers swear by these gizmos and like to use them to make trades. The wireless telephone people say their preferred device is more flexible and useful.

"Generally speaking, you don't want to carry two devices," Mr. Hobbs said. "I think we'll see the high-end handsets for specific applications, but smart phones with integrated PDA functions and integrated Web functionality are too attractive a market device not to happen."

Other question marks loom over wireless. Some experts say it is possible the United States will import a technology called i-mode, which is widely used in Japan and is offered by the company that developed it, NTT DoCoMo. I-mode is a little bit like America Online in that it is a subscription service that lets people connect to the Internet, yet also has proprietary content.

According to Richard Luhr, director of technology strategy at Herschel Shostick Associates Ltd., a consulting firm dedicated to wireless issues, i-mode is more popular among teenagers who want to download Pokemon-type screen savers than among Internet banking customers. But "the i-mode product is very clever," he said. "NTT DoCoMo did it right, and the U.S. networks are doing it wrong."

The difference, he said, is that i-mode runs on an "all packet" network, which allows for a continuous connection, versus a "circuit switch" network, which makes users dial in every time they want to connect. "Right now when you have a WAP phone, you have to dial in and wait for the thing to hook up; all while you're getting charged for air time," Mr. Luhr said. "With i-mode, it's always on, and you only pay for the actual transactions you make. It's always available, you can use it any time, and it's really cheap."

For U.S. banks that are dabbling in wireless delivery, customer loyalty and branding are also strategic issues. Given the small amount of real estate on the screens of wireless devices, the companies that pay carriers most handsomely will get the prime positions. Citi is attempting to corner the market: In April it said it was courting carriers around the world to try to pay to get its name on the start-up screens of wireless devices, in anticipation of the advent of a new and improved technology standard.

Mr. Luhr, for one, does not think this expensive strategy will work. "Even if the phone is preprogrammed to a certain portal, it doesn't mean the phone can't be reprogrammed," he said. "Citi pays all this money for this, and if they don't provide a good experience on their banking sites, people will go bookmark other sites."

Banks that are still in a quandary about wireless need not feel alone. The WAP Forum, a nonprofit association of handset makers and carriers, is still hashing out standards. Just about every consulting firm that serves the banking industry has weighed in recently with a study offering advice and opinions on the wireless market.

One report, by Meridien Research of Newton, Mass., says that there are about 50 WAP brokerage and banking services being offered around the world, but that the service is still in its infancy. "The issue that bedevils financial institutions who want to engage in mobile commerce and provide ubiquitous wireless to their customers is that each particular model, each type of device, and each network requires separate specific adaptations of their systems," the report says.

Randi Purchia, research director at Meridien, said WAP may have a longer shelf life in the United States than in the countries that seem to have a head start. "It's going to take more effort on the part of the Nokias and Ericssons to pump this market up and get everyone keen and eager to use this," she said.


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