What a difference a year can make: Gone are the paeans of praise to the wireless Web's infinite promise that filled many a magazine page. In its place are woeful dirges that chronicle the many shortcomings of this nascent technology.

Despite the media's relentless coverage of the wireless Web, little has been said about what could potentially be a far more formidable obstacle to its widespread adoption than technology snafus: privacy. While the wireless Web probably won't be short-circuited by technology growing pains, it could be derailed entirely by customer fears about privacy and security.

Much of the backlash against wireless in the United States and Europe has focused on its technological inadequacies - slow data-transmission speeds; the need to dial up for each session (in sharp contrast to NTT DoCoMo's "always-on access"); interface limitations; and the absence of worthy Net offerings. These problems will be solved as the West moves to third-generation - which should happen by 2004, at the latest - and marketers learn how to master the medium, creating compelling offers with a minimum of keystrokes.

As a contrast, consumer privacy fears are here to stay, and a well-publicized ethics or security breach by a wireless provider or its content partners could cripple consumer adoption of this struggling market. Unconvinced? Turn to the e-world for evidence. Abandoned shopping carts everywhere have bedeviled online merchants in their fight to turn a profit. Some 54% of customers have decided not to buy a product online because of their concerns about corporate misuse of their personal data, according to Harris Interactive. Privacy worries cost e-tailers $3 billion in 1999, says Forrester Research.

Whether betrayal takes the form of privacy violations or security breaches matters little to the average consumer: Both result in the loss of confidentiality. Schooled by the media in the trials of eluding marketing spam and the terrors of living through identity theft, the consumer is right to be wary. Haven't established companies like Amazon, Microsoft, and the Disney-owned Toysmart all violated their privacy policies? What about DoubleClick's Orwellian plan to compile spending profiles on nine out of 10 Americans? And how about TrustE, the privacy watchdog group, which got caught monitoring its own Web site visitors?

In less than a year's time, customers will be able to be tracked to within 120 meters every time they use their cell phone. It's a marketer's dream, and quite possibly a customer's nightmare. People use their cell phones and PDAs for convenient "anytime, anywhere" access to voice and data services, not to be subjected to a barrage of advertisements.

Adding to the insult: Unless the U.S. adapts a packet-switched network like NTT DoCoMo's, customers who dial up to surf the Net will pay for the dubious privilege of being marketed. Couple a customer's privacy concerns with a high-profile security breach and wireless's hype could turn to hysteria, driving potentially lucrative cell-phone surfers right out of the market.

So what will make the millions - and ultimately billions - flock to mobile commerce? Two things: trusted providers and value-added offerings. While many suitors will line up to woo the wary wireless surfer, banks are perhaps best positioned to win her hand - and wallet.

A word first about products: Much of the discourse about wireless has centered around the types of products best suited to this real-time, geographically sensitive medium, with marketers eagerly trumpeting the advent of location-specific services like coupons and restaurant reviews. They probably won't be winners: Who uses coupons or trusts the culinary advice of an unknown reviewer?

So what will win? While time will tell, value-rich, time-specific services will undoubtedly succeed. Wireless brokerage is a no-brainer, and is already leading the pack among early wireless users. But how about bot-enabled comparison-shopping, alerting customers when specified items go on sale? Or pay-per-use services like video conferencing, weather updates, and real-time traffic video? Free access to services like e-billing, as well as low-balance alerts, fund transfers, low-rate credit, and on-the-spot offers like travel and car insurance could prove a compelling value proposition, cementing the relationship between bank and skittish customers at the same time they deepen wallet-share.

By providing vital services through their own portals, bankers, who have spent decades proving their dependability to both the public and the marketplace, can lead the way in proving wireless services worthy of customer trust and time.

Content isn't the deal-closer, however. Confidentiality is. To persuade customers to hand over credit and account information, telecom and content providers will need to spell out their privacy clauses and security protocol. Customers will want to know that their personal data aren't shared without their permission - not now, not ever. But how do you explain something as sophisticated as a privacy policy over the wireless Web, given the limited screen size? Easy enough: by audio. Customers can signal their acceptance by punching phone keys, or decline the service the same way.

In addition, customers will want to own the marketing process. Opt-in marketing - a model that fills marketers with dread - is the only way to charm the chary. Customers who patiently close interstitials on their favorite Web sites will sign off before they'll wade through legions of Web ads on their phones. They'll want to determine what services they deem worthy - and when they want them delivered.

Marketers had better play by their rules, or virtual wallets and pocketbooks will close all over the planet.

Security is another matter. Banks will want to move cautiously, ensuring that telecom gateways can support full data encryption, device authentication and data storage are state-of-the-art, and safeguards against virus attacks are in place before offering the data-sensitive financial transactions that will lure customers to the airwaves.

Wireless offers tremendous promise to the providers who can safely navigate the twin perils of privacy and security. While many will tempted by the siren song of the media - with its promises of untold billions to first-movers - they would do well to have tough privacy policies and airtight security in place before taking to the airwaves.

As all high-wire artists know, if you're going to walk without a wire, you better have a net.

Mr. Switzer is vice president of the consumer financial services group at AMS Management Systems, Toronto.

Note to Readers

"Viewpoints" is a regular feature in American Banker, appearing every Friday. It serves as a forum for discussion and debate on a wide range of issues in the financial services industry, including management approaches and strategies, legislative and regulatory matters, and public policy in general.
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