The latest in a rash of reports on mobile ecommerce flouts conventional wisdom by suggesting that the biggest application of wireless technology will be in financial services and that the United States will be the biggest market for such services.

Just 10% or 15% of today's $90-million market for wireless financial applications is situated in the U.S., but as the wireless financial market grows to $1.8 billion in the next three years, the U.S. will take over, reckons Datamonitor Inc. Reflecting Datamonitor's London origins, the New York- based research affiliate uses the preferred European term for mobile ecommerce- mcommerce-in its recent report.

Sohrab Torabi, Datamonitor's mcommerce analyst, noted that the goal of Datamonitor's report was to establish what kind of marketing opportunity there is for vendors worldwide in providing technology to facilitate mcommerce. In that, it differs from reports issued by research firms that cater more to financial institutions. Others that have recently reported on the glittering prospects of the mcommerce market include Meridien Research Inc., Newton, MA; the Angus Reid Group, Vancouver; The Aberdeen Group, Boston; and Frost & Sullivan, San Francisco. For instance, a survey Angus Reid conducted in spring for 724 Solutions Inc., a Toronto-based wireless applications provider, found 45% of respondents interested in wireless banking services. Almost all respondents said it was important that their financial provider, or one with which they are familiar, provide wireless financial services.

Subsequent research, released two months ago by Tantau Software Inc., a wireless applications provider out of Austin, TX, supports another Datamonitor contention: Wireless banking will be at least as popular as wireless brokerage. This finding came from a survey of (313) owners of cell phones and personal digital assistants, conducted by Millward Brown IntelliQuest on Tantau's behalf.

Although it is often suggested that stock trades are likely to be the dominant wireless financial transactions, Torabi suggests that today's skew towards brokerage will give way to a roughly even mix of brokerage and retail banking transactions, again by 2004.

Consumers surveyed by Tantau expressed more interest in wireless banking than wireless brokerage. Among respondents' generally high interest in using their cell phones/PDAs to access the Internet, conducting banking was the sixth most popular potential activity (chosen by 35% of respondents), while brokerage, etc. was sixth (the proxy for brokerage, "conducting financial or investment transactions," was chosen by 28% of respondents).

The biggest deciding factors in whether respondents would conduct wireless financial transactions are security (rated as "very important" by 97% of respondents) and-surprisingly-personalization (more than with any other type of wireless activity, 77% said they would be less likely to bank or trade in the absence of personalized service).

Today, the U.S. lags Europe in its use of wireless technology, for reasons including the fact that cell phones are more popular and Europe has a much more standardized telecommunications network. In some European countries, including Ireland, more than half of the population possesses cells phones, whereas it's estimated that less than 35% of the U.S. population has either a cell phone or PDA.

Yet, if one isolates the financial sector, cultural factors make the U.S. particularly suited to wireless service, Torabi notes. "Finance will be more of a U.S. than a European or Asian application because of cultural factors. In the U.S. regular Joes are doing stock transactions." Leaving out those nonetheless more sophisticated and more wired-in every sense-customers, Tohrabi says, "At some time a lot of the mainstream banking customers will be checking to see if their check cleared while on the train."

That time has been brought closer by the late August announcement that Bank of America Corp. was live with its promised wireless banking and brokerage service. The fact that big names, such as BofA, and JP Morgan Corp. are offering wireless services will be "a big boost," Tohrabi says. "Before, the banks involved were smaller players."

"Next year will be a pivotal year in the wireless financial technology market," he says, with global spending on technology more than quadrupling from this year's $90 million, to $380 million. The peak spending year, however, will be 2004, reflecting the initial capital outlay to conduct business wirelessly by many companies worldwide. Total spending will be $5.1 billion, of which $1.8 billion will be for financial applications, Datamonitor estimates.

Asia will experience tremendous growth in wireless technology, Datamonitor forecasts-a point to which Meridien also alludes. In highlights from its research, which touches on financial deployments by the New Zealand Stock Exchange and Skandinaviska Enskilda Banken of Sweden, amongst others, Meridien notes that of Japanese citizens who first went onto the Internet last year, more than one-third did so via cell phone.

Tohrabi notes that Datamonitor's definition of wireless financial services includes making stock trades, checking account balances and moving funds, but excludes the vast number of other occasions where a bank card is used to facilitate remote purchasing.

When Datamonitor talks about the mcommerce market it is referring to revenues from the combined sales of hardware, software, systems integration and professional services necessary to implement a mobile business channel.

These infrastructure providers will be critical to the success of mcommerce, which is also known as the next generation of ecommerce, Datamonitor notes.

The size of the current market for mobile infrastructure is still very small, estimated not to exceed $280 million globally this year. The smallness of the market is mainly due to the still low market penetration of interactive mobile data services, the lack of bandwidth, the lack of content and the high cost. Most financial corporations would rather wait for technology costs to come down and mobile infrastructure technologies to mature than to take a position on the bleeding edge, such as certain etailers and portals appear to be doing. In the world of mCommerce, the winners will not necessarily be those first to market but those who provide the highest quality service, Datamonitor notes.

As the problems of scale, security and functionality inherent in small device markets become fully addressed, the mobile solutions market will grow steadily to a peak of $5.1 billion in 2004, predicts Datamonitor. It will decline slightly to $4.7 billion in 2005, as the market reaches maturity and the price of wireless technology drops. Technology vendors are likely to achieve economies of scale due to the increased sales, Datamonitor notes. The firm also predicts a proliferation in the number of mcommerce solutions to 12,270 in 2005, from 210 today.

Asia has the fastest-growing mcommerce market, but Europe has the biggest market. Europe is expected to preserve its wireless technology lead over the U.S., which will slip from its current second place into third, behind Asia.

Europe is reckoned to be 18 to 22 months ahead of the U.S. in wireless phone technology. This comes in part from Europe's standardization on GSM wireless technology, which allows consumers to use their mobile phones (devices) as they travel across borders.

The European mcommerce market will grow, Datamonitor says, from $130 million today to $1.9 billion in 2005. The U.S. market, valued at no more than $90 million today, will rise to about $1.2 billion in 2005. The slower growth in the U.S. is mainly due to the inability to reach a single mobile telecommunications standard, high prices and the lack of awareness which prevent mobile telecommunication from reaching the critical mass required to introduce mcommerce. Additionally, U.S. companies are also reluctant to make the transition to higher speed wireless Internet access, as they must leverage their already existing investments in the digital networks.

Datamonitor expects the Asia Pacific market value to overtake the U.S. by 2004, growing from $60 million today to $1.5 billion in 2004. That equates to 2500% growth, the highest percentage anywhere. Not only does the audience in this region catch mobile IT vendors' attention, but the lack of traditional telecommunications infrastructure is expected to encourage vendors to build mobile solutions from scratch. The revenue opportunity for building this "wireless-enabling the Internet" infrastructure is immense.

Datamonitor expects the number of Internet users to rise to 1 billion by 2005 and the number of mobile phone subscriptions to grow to 1 billion by 2004 worldwide.

Major opportunities exist for infrastructure providers to profit as mobile data services spread across the globe. Much of the reward, however, will not be from simply layering a mobile solution over existing land line connections to Web sites. The leaders in the mobile infrastructure industry will be those who can define and construct the future mobile Internet services drawing on their experience in developing scalable, high quality solutions.

As Greg Wolfhound, chief executive of 724 Solutions, expressed it in a recent statement: "Last year there was only one financial institution offering wireless Internet access. Before yearend, all major wireless players will have such an offering in the market, and each will have a focus on wireless banking and brokerage services.

Man Yin Li is a freelance writer based in New York.

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