Bank of Montreal Vice President Mark Dickleman tells of a breakfast meeting he had recently that convinced him of the future of wireless banking.

At the end of the meal, the executive he was meeting with drained her coffee, picked up the check and called her bank on her mobile phone. Within fifteen seconds, she had determined there was enough money in her checking account to cover the bill, and handed the waitress her debit card for payment. That showed Dickleman, vice president of wireless and mobile initiatives at Bank of Montreal and its subsidiary, Chicago-based Harris Bank, that there is "an incredible market opportunity for anywhere-anytime access to banking."

Enter wireless technology that allows customers to make bank transactions at their convenience over their mobile phones or personal digital assistants (PDAs). Harris Bank and Bank of America are the first U.S.-based banks to go after retail customers like Dickleman's breakfast partner, hoping to link the growing number of people carrying wireless devices with their Web-based bank accounts.

But banks have a long way to go to catch up with brokerages, some 30 of which have already made the leap from offering online trading via PCs to offering wireless trading over mobile phones and PDAs. Fidelity Investment, Boston, has signed up 27,000 wireless trading customers for its InstantBroker service since launching in January 1999, the year after Wall Street Discount Corp., New York, became the first brokerage to do it.

Some analysts doubt that banks can expect the same level of enthusiasm. While brokerage customers demand continual access to a fast-moving market, it's not yet clear whether banking customers want the same intimate relationship with their checking accounts.

"In the dynamics of brokerage relationships, wireless makes sense; everything's quick-changing and people feel they need to be hooked up," says Ian Rubin, a bank technology analyst with Needham, MA-based TowerGroup. "But the banking side doesn't have the same dynamics (as brokerages), and the products are more static. With wireless banking, the real question seems to be: Is there any demand to fit the forthcoming supply?"

Some banks seem to think so. Harris and Charlotte, NC-based BofA have in the past five months begun offering access to the country's first wireless Internet banking applications, allowing their customers to pay bills, shift funds and receive banking alerts "anywhere, anytime" over their wireless devices.

BofA, a giant with 30 million customers and assets of $632.6 billion, launched its wireless banking service over the Palm VII PDA in October to become the first U.S.-based bank to offer the technology to retail customers. Harris Bank, which has assets of $27.2 billion, became the first U.S. bank to launch wireless banking on mobile phones in December, using Sprint PCS Internet-ready phones.

But some experts warn that banks and brokerages are different. "Even the business case for wireless trading is not great, but (wireless) banking is much trickier," says Mark Zohar, senior analyst with Cambridge, MA-based Forrester Research. "There's less urgency with banking, and the potential services have a limited time-sensitivity."

The numbers, however, are compelling. The Yankee Group forecasts that the number of Internet-accessible wireless devices around the world will grow from the present estimate of between 500 million and 750 million to 1.25 billion by 2003. And the more optimistic observers predict that within five years, more people will log on to the Internet over wireless devices than over their PCs.

Digging for gold

Consequently, "There's a gold-rush mentality going on for wireless" in the financial services market, Zohar says. And not just among banks. In January, Toronto-based 724 Solutions Inc., the pioneer developer of wireless banking software and supplier of Bank of Montreal and Bank of America, sold 6 million shares at its IPO after demand forced underwriters to lift the earlier offer price of $11-$13 to $26. The shares closed their first day of trading at $71 and 13/16.

That same month, New York-based brokerage software developer w-Trade Technologies launched an array of wireless financial services aimed at a range of financial service companies. Around the same time, three other companies-Foliage software in Burlington, MA; cavion.com in Denver; and nFront in Atlanta (now called Digital Insight Corp.)-launched their own wireless banking products. Foliage's iBrowserPlus will support banking and stock trading on PDAs and cell-phones, while nFront and cavion.com released banking software that functions on any wireless device.

In the United States, the number of non-phone wireless Internet devices is predicted to grow from 8.2 million in 1998 to 32.5 million by 2003, according to Dataquest, a unit of GartnerGroup, Stamford, CT. The U.S. mobile phone penetration rate is predicted to swell to around 60% in three years from a current 20%, according to forecasters at Sun Microsystems. That will match penetration rates in Europe, where wireless banking has enjoyed a head start compared to other regions.

Europe's standard GSM (Global Systems for Mobile) network has lent a degree of technology-friendly uniformity not known in the States, and banks in England and Spain now issue their wireless customers with bank-branded phones. By comparison, U.S. mobile carriers operate on either GSM, TDMA (Time Division Multiple Access) or CDMA (Code Division Multiple Access), depending on location, forcing software companies to spend more time and money developing flexible network products. All of which goes to the argument, supported by many bankers and software developers, that wireless Internet-based services represent the future of retail banking.

"The three benefits this technology delivers are differentiation, customer acquisition and retention, and cost savings," says Alistair Rennie, senior vice-president of marketing at 724 Solutions. "Banks want to build a deeper and more personalized relationship with their customers. They want to build customized products and market them personally to the consumer, and this technology delivers that."

Leaders of the pack

Harris Bank officials are already convinced. The bank offers wireless services based on the Veev application rolled out by its parent, Bank of Montreal, in Toronto in May 1999. The Canadian bank and 724 Solutions, along with carrier Bell Mobility, spent 15 months developing the software, which was the first in North America to link online banking services to mobile devices via wireless Web browsers.

"The experience in Canada shows there's a whole group of people leapfrogging to wireless Internet," says Charles Piermarini, executive vice president of electronic channels at Harris Bank. "We feared that if we didn't (launch the service) we'd lose customers." Harris Bank will achieve cost savings from wireless banking once the percentage of wireless transactions grows sufficiently, he says, predicting this will happen "in the next couple of years."

But Piermarini also says the banking industry is "not robust enough on its own" to justify launching a wireless service. Harris Bank recently paid $45 million for Chicago-based discount brokerage firm Burke Christiensen and Lewis and is integrating its platform into its wireless division. "Investment and brokerage is the key component," he says. "I'd be surprised if the other banks offered purely wireless banking."

BofA, which has 1.7 million online customers (see Remote Banking Rankings, cover story, Jan BTN), launched its wireless service last October on the Palm VII and plans to launch on mobile phones and other devices this year. However, internal changes might affect that plan. Bank spokesman Robert Newton says the executive in charge of the bank's wireless division, recently left unexpectedly. No Bank of America officials were available to comment.

Fidelity Investments' InstantBroker wireless service was launched on the RIM Interactive 950 pager in January 1999 and four months later on 3Com's Palm VII. The InstantBroker logo now appears on the Palm VII start-up screen. Fidelity spokesman James Griffin says the launch followed a survey of customers in the summer of 1998 in which 40% of respondents said they had missed market opportunities because they were unable to trade at will. "We've positioned ourselves to be at the forefront of each new development, so moving to wireless was a natural evolution for us," Griffin says.

Fidelity and other pioneers like Merrill Lynch & Co., which has a stake in brokerage software developer w-Trade, will profit from the anticipated spread of wireless devices and their adoption by online traders, says TowerGroup brokerage analyst Ed Kountz. "They've got their names burned on palm pilots and pagers, and it won't be long before they're on mobile phones and car computers. The more their names spread on mobile devices, the more these firms should benefit," he says.

'People can wait'

Many analysts believe that the time-sensitivity inherent in securities trading makes it highly suitable for mobile devices, while wireless banking will appeal primarily to financial service giants that can offer a complement of banking and brokerage services. So smaller banks without a brokerage arm will tend to shy away from wireless services, according to Rubin.

Larger banks' customer demographics also could be a key to making their wireless banking profitable. Rubin says, "Better educated, wealthier and younger customers can afford the devices and the access charges. Most banks have a share of these potentially profitable customers, but whether they have enough depends on their size. That's another reason why smaller banks will hang back."

He doubts that wireless banking on its own can deliver enough savings to justify the initial expense. "Most banks think it's big news if they get 10% of their customers online," the analyst notes. "But what percentage is likely to switch to wireless? Maybe 3% or 4%, and I don't think that's enough." At the moment, he observes, the only institutions that need to introduce wireless banking quickly are online-only banks and those positioning themselves ahead of the technology curve. But,"that's only 20 or 30 out of 8,000 institutions (in the U.S.)," he points out.

Dickleman at Bank of Montreal counters that the value of wireless to banks is not yet fully understood. "When I ask people at conferences whether they have banking products in their wallets they use every day-credit cards, debit cards, check books-I get a 100% response." Many of these people could potentially switch from using these products to using devices like mobile phones, he argues.

Technology providers are equally bullish. Donna Oliva, CEO of w-Trade, says a number of banks are currently in discussions with resellers of her company's wireless banking software, w-Bank. w-Trade's new suite of wireless financial service products will be marketed "separately by demand to individual institutions or in groups to more integrated financial service firms." she adds.

Despite these high hopes, analysts still doubt whether wireless banking has a future as a stand-alone service. As Ian Rubin of Tower Group put it: "It's the sort of thing that grabs headlines now, but the fact is that most people can wait."

Rob Luke and Susan Skiles Luke are business writers based in Indianapolis, IN.

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