Here's to the great duets of all time. Astaire and Rogers. Mercedes and Benz. Mays and Mantle. Banking and wireless technology.
Whoa. Banking and wireless? After all, financial firms are just beginning to wet their feet with mobile services. Yes, the early returns look promising, but it's premature to call the supposed next wave in financial services a sure bet.
Or is it. Some financial industry observers say that, while banks have been slow to embrace wireless technology, they are now moving fast to catch up. "The banking industry was late to the game on wireless technologies," says Mark Zohar, research director at Forrester Research Inc. "But even though the industry was caught blindsided, banks will be damned if they're caught napping on wireless. Nobody's sure what the wireless business models will be-all they know is that wireless will be big."
Banks think so, too. "Wireless banking is going to be huge," says Charles Piermarini, executive vice president of Chicago-based Harris Bank, a pioneer of wireless financial services. "People love doing things on the go. And they especially love doing their banking on the go."
In its most basic form, mobile banking consists of remote account access integrated with online payment and electronic messaging. The technology enables users to perform account inquiries, transfer funds, loan payments, loan advancements and review transfer history. The payment system offers flexibility and control in making and changing payments. Electronic messaging allows users to correspond directly with the financial institution and vice versa. Transactions can be performed using Web-enabled PCs, personal digital assistants and phones.
The wireless revolution in financial services is just beginning to take root in the United States. But as Piermarini attests, users are bullish on the technology. Harris parent company Bank of Montreal rolled out its wireless service, called Veev, in May 1999. Follow-up surveys showed not only that customers liked the technology, but offered a revealing glimpse at how they used mobile banking services.
Customers used Veev in their cars 41% of the time; at work (21%); in transit (18%); at home (10%); and in other locales, such as restaurants and theaters (10%). The most popular functions were balance inquiry (80% of participants); account history (60%); bill payment (50%); and funds transfer (40%). Less popular were credit card transactions and check ordering. Interestingly, access to non-financial information like weather reports, horoscopes and news was as popular as having account access. The bank found that Veev was used at about the same rate as ATMs and second only to PCs. The average session lasted about 3.5 minutes.
Most of the users taking part in the pilot had six-figure incomes, regularly traded stocks and already owned wireless devices. That demographic holds true across the wireless banking spectrum.
At Richardson, TX-based Texans Credit Union, which serves 130,000 employees at local companies such as Texas Instruments Inc. and Nortel Networks Corp., among others, use of wireless banking services is high. "Our customers think wireless banking is a great idea," notes Lori Daniel, vice president of marketing at the credit union, which uses a wireless application from Plano, TX-based EDS Corp. "It's extremely popular, especially among the high-tech crowd. You walk out the door and you can see people walking around with their Palm VIIs, checking their accounts. And it's another great delivery channel for us."
Such evidence of the popularity of mobile banking is becoming increasingly difficult to ignore. "When we studied wireless applications at banks, we found that consumers really loved using the technology," offers Dana Stiffler, an analyst at Newton, MA-based Meridien Research Inc., which recently published a study comparing wireless use in the financial industry in the U.S. and Europe. "In fact, consumers loved wireless so much, we found they were checking their account statuses and banking activity 10 times a day."
In the report, titled Wireless e-Financial Services: Reaching Customers Anytime, Anywhere, Meridien predicts that the number of digital mobile device subscribers to rise to half a billion in North America, Europe and Asia combined by 2003. In another study on the emerging wireless technology market, The Yankee Group, Boston, forecasts the number of Internet-accessible wireless devices around the world to swell to 1.25 billion by 2003, up dramatically from the 500 million to 750 million devices estimated to be in use globally today.
Some experts predict that within five years, more people will log on to the Internet over wireless devices than over their PCs. And while U.S. financial institutions have yet to take the plunge into mobile service delivery, the size of the retail consumer market is approaching critical mass.
"If we look at the Scandinavian or Japanese markets, mobile device penetration is over 50%, with retail customers already accustomed to using these devices for financial services," Stiffler says. "In the U.S., wireless may never fully replace wireline Internet-based services, but we already see service offerings entering the market. While the European and Asian institutions are making broad offerings to all customers, American firms are strategically targeting high-end active traders or potential day traders. However, we expect to see more anytime, anywhere services from U.S. banks in the near future."
Already out of the gate in the race to bring out wireless services are Bank of Montreal, Harris Bank and Bank of America, with Wells Fargo and Citibank right on their heels.
Following its wireless service package launch last year, Bank of Montreal, in conjunction with 724 Solutions Inc. of Toronto, has expanded the program to include online trading through the bank's InvestorLine discount brokerage. Bank executives say the wireless trading service will at first only be available to InvestorLine clients who meet certain eligibility criteria.
BofA, which has more than 1.4 million online customers, launched its PDA-based wireless service last October and plans to launch on mobile phones and other devices later this year. To use the service, customers need a Palm VII organizer from Palm Inc., Santa Clara, CA, a subsidiary of 3Com Corp.
The Palm VII uses Web technology to access customer account information from the bank. The technology, called Web clipping, extracts specific information from a Web site through special query forms residing on the Palm VII. Bank of America's online customers in New York were the first to test the wireless Internet connection through the Palm device in May 1999. The bank is also working with 724 Solutions to enable wireless banking through mobile and smart phones. A pilot for these devices is scheduled for next year.
Last December, Harris became among the first U.S. banks to introduce banking via wireless phones, with a 100-person pilot. Using WAP (wireless application protocol)-based, browser-equipped cell phones, customers can access account balances; make money transfers; and receive customized stock quotes, news, sports, weather and horoscopes. The bank is now preparing to expand the pilot to 250 people and introduce investment portfolio access, bill payment and credit card advances.
Harris developed much of the wireless software internally, rather than just "scraping" existing Web sites by uploading and downloading static portions of a standard HTML page to a cell phone or PDA. "We officially started on the wireless platform back in January of 1999, but in essence really started in 1998," Piermarini says. "We'd been working with wireless up in Canada [with Bank of Montreal]. We were approached by 724 Solutions and we liked what we saw."
In fact, Harris is so bullish on wireless financial services that it has taken an equity position in the tech vendor. "In terms of absolute number of phone users versus Internet [users] in general, we see a 20 to 1 advantage in favor of wireless phones," Piermarini says.
Piermarini adds that while Harris will primarily spend the rest of 2000 "building on what we already have." New services in the works for 2000 include online brokerage, and bill presentment and payment.
While big U.S. banks are moving cautiously into mobile eservices, a growing number of smaller financial services firms are moving headlong into wireless banking.
Last April, USE Credit Union announced that it was the first financial institution in the U.S. to offer wireless Internet banking to all of its customers. Running on an application from San Diego-based SensCom Inc., the service enables users to check account balances, review account history and perform funds transfers.
To promote the mobile phone-based program, USE is waiving its $10 membership fee for new customers who sign up for wireless Internet banking and is suspending any service charges. "By offering wireless Internet banking services, we are responding to the needs of our members to have the credit union at their fingertips," says Linda Baughman, president of the $430 million credit union.
USE opted to use Web-enabled phones, with Sprint PCS as the carrier, because phones today are cheaper and more common than PDAs. "We liked the Palm VIIs, but we wanted something more affordable for customers," Baughman says. Reception was an issue for USE as well. "One of the things I thought we'd hear from customers in the pilot was that they'd had a problem connecting if they were in remote places, like on a mountain or at the beach. But our testing group found we didn't have that problem. We've already gone through the learning curve with home banking, and I think people are a lot more technology savvy these days. They knew what the deal was if the phone went down."
Baughman adds that "a significant portion" of the credit union's 8,100 home banking customers-out of 58,000 customers overall-are interested in the wireless service. "Being in San Diego, finding early adopters shouldn't be a problem. Everyone here really is into the personal space age."
A similar tale is unfolding at Old Kent Bank, a subsidiary of $19 billion Old Kent Financial Corp., a financial services company headquartered in Grand Rapids, MI. Old Kent operates more than 260 full service offices in Michigan, Illinois and Indiana and more than 140 mortgage lending offices nationwide.
Using Total Wireless software from Financial Fusion Inc., a subsidiary of Emeryville, CA-based Sybase Inc., Old Kent is among the first regional banks to integrate content and banking transactions on Palm VIIs and cell phones.
Unlike wireless applications based on architecture that combines HTML presentation code with business logic, mobile applications using Total Wireless software do not need to be rewritten for wireless devices. That leaves Old Kent free to leverage its existing investment in its Web banking systems, a big plus for budget-minded regional banks. Also, since Financial Fusion's software is separate from the user interface, code can be written in one place and used anywhere-on the Web, a cell phone or a PDA.
"At Old Kent, we really wanted to give the user control in both Web and wireless environments," explains David Schneider, executive vice president. "We really want to optimize the total user experience."
And with the high cost of wireless phone service in the U.S., this emphasis on convenience and customer service is key to selling consumers on the value of mobile banking. "Wireless is going to have tommake it as a customer relationship management tool, at least until prices come down," Zohar says. "Ultimately, consumers won't want to spend much more for wireless services than they already do for Web services. But when you position wireless as more of a personal touch issue for customers, you're going to find some success." Given time, others feel that wireless banking will transcend all other modes of customer banking interaction. "It's a killer app," says Tom Parham, chief technology officer at SensCom. "You combine a cell phone and a bank account, with no real barrier to market, and you have a nearly universal business appliance."
So make way, Fred and Ginger. Grab some bench, Willie and Mickey. There's a new duo in town grabbing the headlines. And it's just getting started.