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A distant dream?news
Why did mobile and wirel
08 May 2003

Chennai: Fidelity Investments kicked off the wireless revolution in the financial services industry by introducing the wireless-accessible trading service to its clients for the first time way back in 1998. But in the last four years, an estimated quarter of a billion dollars investment in the retail wireless banking and brokerage solutions have not been able to bring the shine as expected.

Reports say that only one-half of 1 per cent of all mobile phone subscribers are taking advantage of these wireless services. Though Asia and Europe are moving up, the US has been left behind in the mobile and wireless technology adoption race.

Celent Communications LLC managing director Octavio Marenzi says the number of wireless financial services users is expected to reach 80 million worldwide by 2004, but only about 3 per cent of them will be US users.

Moreover, the wireless effervescence is visible only in larger financial institutions while the small and mid-sized firms are not seen in action. Reports say only four of the top 10 US banks (Bank of America, First Union, Fleet Bank and Wells Fargo) and four of the top 10 US securities houses (Merrill Lynch, Fidelity, Charles Schwab and E*Trade) launched retail-mobile services since 1998.

Though wireless and mobile technologies failed to make commercial success, they have been able to attract attention as effective communication tools for financial institutions. Celent reports say wireless use for communication purposes within the financial services arena has zoomed up to 80 per cent among the top 25 securities firms on Wall Street.

Why is the mobile and wireless spree on the wane?
Financial services institutions had welcomed wireless and mobile technology into their boardroom to offer their customers the freedom of paying bills while stuck in traffic jams, to receive notifications of changes in stock price while present at a party and to provide more personal and intimate relationships. But real success seemed a far cry now, as the massive adoption of the technology did not prove to be a right choice.

Celent Communications estimates that the total number of users actively conducting banking and brokerage transactions peaked around a quarter of a million in 2001, and has been in steady decline ever since.

Let's look at the disappointing results of first-generation wireless banking and brokerage to numerous factors:

  • Small screens and slow connection speed that make it difficult to display complex financial services information on mobile devices.
  • Concerns for security that prohibited consumers from conducting financial transactions.
  • IT recession, which has served as the biggest factor behind the downfall of wireless and mobile adoption.
  • Excessive reliance on computer-based Internet connectivity.
  • Shift to STP; hence T+1 has compelled firms to retrench their mobile and wireless budget.
  • Contractual agreements that some financial institutions have with their vendors where they agree to pay the vendors per user that subscribed for the service. But the pressure to cut down expenses have encouraged them to avoid promoting their wireless service, as fewer users will help keep overall solution costs down.
  • Myriad protocols, devices as well as costly and confusing data charges being levied on top of voice charges by wireless carriers.
  • Lots of promises but unable to deliver on what the end user most valued.
  • New evolving technology like Web services that also includes such concepts as 'any device, anytime, and anywhere.'

However, companies like Charles Schwab had enjoyed the largest consumer base for their mobile offerings because they have a perfect blend of investment together with strong promotional campaigns. They had invested in huge staff. For example, they had a wireless team of more than 50, larger than some wireless consultancy firms' entire staff.

A Deloitte survey of 650 business executives shows that 51 per cent did not even understand the benefits and uses of wireless, 20 per cent were not even confident that wireless was sufficiently developed for business use and 22 per cent responded that they had no budget to spend on wireless.

How to bring back the lost lustre?
Despite all odds, financial services institutions can still experiment with wireless and mobile technology to boost their top- and bottom-lines by adding revenues, increasing their customer base and thus developing a more friendly and intimate bond with their customers.

This billion-dollar industry does have the potential to drive the wireless industry if it utilises the right combination of technology, application and target markets. Applications that can drive user adoption, solid infrastructure that can support numerous user-friendly, cost-effective and high-functionality services for wireless retail banking and brokerage can boost the industry.

Celent recommends that financial institutions re-examine their current wireless strategies and take the following actions:

  • Firms that currently do not offer wireless services should not think of investing in the future.
  • Those that currently offer wireless services can think of cancelling wireless services entirely if there is a small user-base or insignificant transaction volume.
  • Those firms that have already decided to invest should ensure that the spending levels are controlled. Celent estimates that a budget between $250,000 and $500,000 should suffice even for the largest institutions.
  • All institutions should look at their current core retail systems and ensure that they are multi-channel and cross-product solutions in order to minimise reliance on unproven, unstable vendors providing pure-play wireless services.

On the other hand, Gartner has some interesting findings. They say the financial services providers that will survive until 2010 will have made some drastic changes to how they interact with their customers and hence they will facilitate mobile commerce.

Gartner believes that our PDAs, phones and other wireless devices will merge into a 'connector' device (around 2006), which will become a universal productivity tool for everyday life. The connector, a 3-by-5 inch semi-flexible colour-screen device, may provide an always-on Internet connection with direct links to conduct transactions with financial services providers.

For example, before leaving for work, 'John' may use his connector to make sure he made his last mortgage payment as he eats breakfast with his family. The connector will also act as a phone and its location sensitive services may offer special discounts or opportunities based on the user's proximity to pre-selected retailers.

After scheduling his bill payments, John begins to read the financial news streaming to his connector. From the list of 15 or so stocks in his profile, John can immediately see that the selling price of his favourite stock has reached an 18-month high. He says, "Call Bob," and within moments John can hear his broker's voice through his earpiece and see him on his connector screen.

John asks to see the stock's three-month performance graph, which Bob pushes to John's screen. John decides to sell 100 shares of the stock and have his profits deposited in his various accounts according to his instructions.

We know that every action has an equal and opposite reaction. In the same way, the evolution of any new technology wave creates lots of hype and hope but at the same time may bring some adverse side effects too. However, financial institutions have been known to be very enthusiastic in accepting any new technology that is around.

They have tasted what wireless and mobile technology is all about, though the taste didn't linger long. Will they think twice before embracing another new technology? May be the experimentation with new technologies will always keep this billion-dollar industry in the news.


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A distant dream?