The Internet is throwing bankers a curve: Just as they are fully plugging into it, the Internet is coming unplugged.
Advances in wireless communications are extending the Net to a variety of portable devices and appliances, such as cellular phones and pagers and palmtop computers. These mechanisms pique the interest of financial services executives hoping to give new meaning to the term "alternative delivery system."
"This is what is meant by 'anytime, anywhere access,'" said Ed Kountz, an analyst at Tower Group in Needham, Mass., who follows wireless technology with a special emphasis on its rapid takeup in securities brokerage.
"Everybody wants to be global," said George Davis, chief operating officer of Aether Technologies, a vendor in the field. "To be untethered creates a new paradigm."
"Mobile commerce is going to take us all by storm," said Ashraf Dimitri, president and chief executive officer of Oasis Technology Ltd. in Toronto. "There is an incredible future ahead of us."
True to Internet form, traditional banking companies find themselves playing catch-up to securities companies, among them Fidelity Brokerage Services and Discover Brokerage. They concluded early that their on-line trading customers' needs aligned well with the short bursts of data that can practically be delivered to the current generation of portable appliances.
Having moved fast, the securities industry seems well prepared for when more sophisticated devices and broader-band communications capabilities come down the pike-though these may have the offsetting effect of making everything easier for later entrants.
"Wireless is a key technology development for innovation," said Ajei Gopal, director of architecture and technology in International Business Machines Corp.'s pervasive computing unit. But with many aspects of wireless technology in a state of flux-technical standards such as the Wireless Application Protocol, known as WAP, still require considerable refinement-"we will see lots of enhancements and standards," Mr. Gopal predicted in a recent interview.
The technology providers are touting the competitive advantage that being a "first mover" into wireless can bring. It may be too early to tell whether that has truly been achieved, but Fidelity has not looked back since launching its InstantBroker remote service last October and enrolling several thousand customers.
"Feedback has been positive, and we are getting many inquiries every week," said spokesman Jim Griffin at Fidelity Investments. It began delivering services to two-way pagers distributed by BellSouth Corp. and recently unveiled an upgrade for 3Com Corp.'s new Palm VII organizer.
Along with a new Active Trader Web site and natural-language speech recognition for telephone contacts, Fidelity is using InstantBroker to reach investors who are "busier than ever and are demanding more reliable, convenient, and accessible tools," said Stephen Cone, president of customer marketing and development at the Boston company.
"Fidelity is driving its brokerage business into the 21st century," Mr. Cone said at a Palm VII and Active Trader preview in May.
"We think (wireless) is reaching the point of being a competitive necessity," said Jason Brown, communications director of w-Trade Technologies, which offers a wireless system currently used by about a dozen securities companies. Its first customers tended to be small discount brokers that saw wireless as "a way to differentiate themselves in a crowded market."
W-Trade just released a banking version of its system, though Mr. Brown conceded that it "may not yet be as compelling" as wireless trading. He predicted w-Trade would announce its first bank client this year.
W-Trade's latest signing, Dreyfus Brokerage Services, offers wireless as an enhancement of its on-line service at no additional transaction charge. This is meant to set it apart from Fidelity, Aether Technologies customers Discover and Bear, Stearns & Co., and others.
Jeffrey Nachman, CEO of Dreyfus Brokerage Services, sounded less like a technology enthusiast-he said the current state of the art severely limits how much data can be delivered to a device-than a business pragmatist.
"People want to be able to follow the markets when they are away from the home or office," he said this week. "We are trying to anticipate customer needs and be ready for changes in the market and technology as they happen."
Meanwhile, excitement in the technology world is running so high that some experts are talking about a "wireless revolution" dwarfing what the Internet so far has wrought. The research firm 4th Wave Inc. has said that wireless appliances are bringing about a fifth generation of computing; personal computers were the fourth.
Trend-watchers and strategists speak with at least as much certainty and conviction as they had at early stages of the PC and Internet phenomena- except that they see wireless happening faster.
"It's the future," said John Gage, director of Sun Microsystems Inc.'s science office and a noted technology scenarist.
He said that with the arrival of the Palm VII, now in limited distribution, the future is close enough that bank CEOs should "spend $500 on it" and let senior managers brainstorm on its place in the delivery system.
The network economics are so compelling and unprecedented, Mr. Gage said, that bankers should build radical assumptions into their planning: "Assume 50% to 60% cellular penetration in three years, zero cost for voice calls, bandwidth that is free, and think about the implications on the business."
"There is so much wireless infrastructure that it becomes cheaper than the wire infrastructure," said Pierre-Francois Catte, general manager of the appliance systems division of Hewlett-Packard Co.'s Verifone division. "There is overcapacity, which makes wireless cheaper. It is faster than wire for a lot of things and easier to use. We love it."
"If you thought the Internet made an impact on the world, just wait until WAP services become widespread," said Craig Kanarick, chief scientist of the Internet consulting and development firm Razorfish Inc.
The Wireless Application Protocol, other guidelines like it, and unwired strategic aspirations in general are common to a long list of companies that is a Who's Who of computing-communications convergence: AT&T, Ericsson, IBM, Microsoft, Motorola, Nextel, Nokia, Palm, Qualcomm, Sun, and more.
They are making the kinds of commitments now to wireless that major corporations did a half-decade ago to make the Internet the reality it is today for electronic commerce.
"This is huge," said Mr. Kanarick. His phrasing may be a bit hackneyed, but his drift is widely shared.
"The Internet is really a stepping-stone to mobile commerce," said Mr. Dimitri of Oasis Technology, an electronic payment systems company that counts MasterCard, Visa, Citigroup, and other big network operators among its customers. "You can only attract so many people to PCs." Wireless is regarded as almost limitless.
Mr. Davis said his company, Aether Technologies in Owings Mills, Md., was founded in 1996 on the notion that "the masses would someday take advantage of wireless data networks."
There are already about 70 million cellular telephones in the United States. Because of heavy business use it is difficult to relate that raw number to the usual measures of household penetration in the consumer market. But as a rough benchmark, the cell phone total is in the same range as cable television subscribers.
Greg Wolfond, chief executive officer of 724 Solutions Inc., a developer of wireless banking software, has said that cell phones' actual penetration of the U.S. population exceeds 20%. When European and Asian markets passed that threshold, he said, wireless opportunities escalated, and he sees the same happening here.
International Data Corp. of Framingham, Mass., and 4th Wave Inc. of Alexandria, Va., put the cellular penetration rate at 43%, which 4th Wave says is about equal to central air conditioning.
Half of U.S. households-about 50 million of them-have a PC, though not all are wired through modems to the outside.
Cable set-top boxes, cell phones, and any other kind of remote appliance or mobile device are emblematic of what IBM and others have defined as pervasive or "any to any" computing. This delineates a battleground out of which a future, "seamless" technology platform is expected to emerge.
In this ferment, wireless is showing signs of dislodging wireline. Microsoft Corp.'s vision of "any to any" connectivity is in conflict with Sun Microsystems and its "write once, run anywhere" Java language.
Microsoft is trying with its CE operating system to attack 3Com/Palm's dominance in the personal digital assistant market. And the mobile phone industry is seeking to rationalize an alphabet soup of standardization acronyms-such as CDMA, CDPD, GSM, TDMA, WIN-and move in the direction of WAP and a more advanced, interoperable, data- and Internet-friendly approach called 3G, for third generation.
From a U.S. perspective, cell phones are only a beginning-and a crude one at that-though companies such as Motorola, Nextel, and Qualcomm are coming out with a steady stream of Internet-ready phones.
The multiplicity of technical standards, the difficulty and expense of roaming outside a given carrier's territory, and the limits to how much information can be displayed attractively on tiny screens are regarded as obstacles to anything but simple inquiries and responses. Examples of these include short e-mails, weather reports, driving directions, flight information, and, of course, stock trades and account status.
"You can't do massive interactive (stock) charting on a pager," said Mr. Kountz, the Tower Group analyst.
Personal companions or organizers have bigger screens, better graphical capabilities, and marketplace familiarity traceable to the earlier- generation Apple Newton and Palm Pilot. Dataquest Inc., a GartnerGroup company, has forecast a 47% increase in hand-held computer shipments worldwide this year, to 5.7 million units, rising to 21 million by 2003.
The hand-held "installed base" would grow from 8.2 million last year to 32.5 million in 2003, fueled by "a new class" of wireless and communications applications, said Dataquest mobile computing principal analyst Scott Miller.
International Data, in a broader study of "smart hand-held devices," projected 35% growth in units shipped this year, to 8.9 million. The United States accounts for 45% of the market. Palm's share of delivered devices was 27%, well ahead of No. 2 Sharp Electronics' 8%, and in the "handheld companion" category Palm was at 42%.
Computer Economics Inc. of Carlsbad, Calif., classifies the devices as low- and high-end models, accounting for about one-third and two-thirds of the market, respectively. It said total shipments would rise from 6.5 million this year to 14 million in 2003.
International Data research manager Diana Hwang said "mobile work force" notions are driving growth, with interest especially strong in $300 personal companions, in $200-and-less Palm and Windows CE devices, and in a new breed of smart telephones.
A currently popular class of equipment for financial services is pagers such as those with which Fidelity inaugurated InstantBroker. In that and some other programs, the device of choice is the RIM Interactive Pager from Research in Motion Ltd. of Waterloo, Canada.
Among its boosters is Nagy Moustafa, president and CEO of Diversinet Corp., a Toronto digital certificate company that works with RIM to ensure customer authentication. Diversinet is also active in organizations like the WAP Forum and Wireless Data Forum, where industry leaders like Ericsson, Microsoft, and Nokia seek common ground in hopes of sharing the wireless wealth.
"I find this useful for mobility," Mr. Moustafa said of the RIM pager. "I can do a transaction without opening a PC or using a phone line or anything."
He said that since the device costs $350 plus a monthly air time charge it might be worth a financial institution's while to absorb the expense of putting pagers in the hands of "high-end clients who are always on the move."
Fidelity offers InstantBroker to people who have $100,000 in accounts or do at least 36 trades a year and maintain at least $20,000. The pricing for service on the Palm VII-once the client buys it-is $9.95 or $24.95 a month, depending on features.
The two-way technology makes it feasible for clients to link their investment and bank accounts with different companies, executing "account- to-account transfers," Mr. Moustafa said. "I can see banks going toward that."
Yet it is clear that newfangled appliances, even at stratospheric rates of growth, will not soon match cell phone numbers.
Andrew Seybold, a wireless authority and editor-in-chief of the monthly magazine The Outlook, said the Franklin Rex and Motorola PageWriter 2000 are direct RIM rivals, though in the organizer market Palm has done a good job of staving off CE and proprietary-operating-system devices from the likes of Casio, Philips, and Sharp.
Mr. Seybold said he disagrees with assumptions in the wireless communications industry that "we will all carry a single device." Because of the public's limited experience at this early stage, "it is our belief that all of the subcategories will coexist."
"Any-to-any devices will be small, light, and cheap enough that I won't mind carrying another one," said Edward Nazarko, a consultant at Scient Corp. of San Francisco, who serves the financial industry. "The Palm is not pretending to be a computer," he said, adding that it is likely to be one among many appliances taking on specific functions.
Mr. Gopal of IBM said, "Down the road there will be a lot of devices, applications, and form factors, and issues of content will evolve with the devices. Systems will have to be future-proof and capable of being rendered in form factors not now contemplated"-which is doable by relying on flexible, open tools such as XML, the eXtensible Markup Language.
"At this point we do not know much about the size of the market for such devices," Mr. Seybold said. "While 3Com has sold more than two million Palm devices, let us not forget that there are more than 60 million wireless phones and 45 million pagers in use in the United States."
And the United States, relatively speaking, is not where the most action is.
"Americans think they know about cell phones," said Mr. Gage of Sun Microsystems. "Go to Hong Kong or Finland, where 70% of the population is walking around with cell phones. The climate is completely different." And so is the experience level in banking by wireless.
