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Banking without a wire
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October 22, 1999: 6:28 a.m. ET
Europe, Asia surpass U.S. in offering wireless digital financial services
By Staff Writer Alex Frew McMillan
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NEW YORK (CNNfn) - Don't hold your breath if you're an American who wants to read your bank balance or make sure a check has cleared via your cellular phone. Though banks and brokerages have jumped on the Internet, they've been slow to move toward wireless, digital financial services.
But you're likely to have better luck if you live in Europe or Asia. According to Newton, Mass.-based Meridien Research, close to 40 million people will use wireless, electronic financial services by 2003. Most of the growth will come in those two parts of the world, the research company predicts.
In fact, Asia and Europe will have more people hooking up to their bank and brokerage accounts through wireless gadgets than accessing their accounts online.
Why is wireless hotter outside the States?
Right now, around 1.6 million people have wireless financial services in Europe, compared to 1.3 million in Asia, mainly Japan, and just 30,000 in the United States. Why? There's a variety of reasons, some technological and some cultural.
For one, though the push toward "smart phones" that can use the Web and e-mail has started, only one person in five has digital devices of any kind in the United States. Analog phones still account for 75 percent of cell phones.
Digital is necessary for the two-way, "push and pull" communication to do your banking or trading with nary a wire in sight. And digital has caught on earlier in Europe, where 36 percent of people have some sort of wireless digital device. Asia isn't far behind. In Scandinavia and Japan, more than half the population has digital devices.
In addition, Europe has one generally accepted standard for mobile phones -- known as the Global System for Mobile Communications or GSM -- that allows for short, two-way messages. The United States has a hodgepodge of competing technologies, making it expensive for financial institutions to reach a broad range of customers.
On the cultural side, more expensive land lines in Europe have prompted many more people to adopt cellphones, particularly in Finland, Sweden, Germany, Italy and France. Asia also has a high number of cellphones per person. Finally, fewer people are hooked into the Internet in Europe, and there are per-minute costs for surfing it, too.
In the United States, people may not think about what it would mean to be able basically to have their own portable ATM -- minus the cash dispensing for now, of course -- on their hip or in their handbag.
"A lot of them are going to be satisfied with getting information through the Web or an e-mail," said Jim Bruene, founder of the newsletter Online Banking Report. For U.S. banks, "before you get to wireless, there's going to be 10 things you should do to make sure your Web site works well."
What does that mean?
As a result, hardly any banks are exploring wireless ways of talking to their customers in the United States. But "most top European financial institutions will offer wireless financial services by 2001," according to a report Meridien Research put out in September. More than 70 percent will have mobile electronic financial services by 2003.
In Asia, particularly Japan, the technology service provider tends to pay for the cost of hooking up to customers, rather than the bank. Not surprisingly, that has meant around 60 percent of the banks already offer wireless financial services.
Given those trends, Meridien puts the usage numbers for Europe at more than 18 million by 2003, compared to more than 12 million in Asia and around 8 million in North America.
Does that mean North Americans are stuck to their land lines? Not necessarily. In Canada, the Bank of Montreal started looking at wireless banking two years ago.
In May it launched a 90-day pilot of "Veev," which lets customers use either a Qualcomm (QCOM) cellphone or 3Com's (COMS) Palm organizer to view balances, pay bills and transfer money between accounts. Ultimately the bank plans a broad roll-out of Veev, with the added option of executing stock trades, in 2000. The service also gives news and weather.
In the United States, online brokerages have led the wireless way. Fidelity Investments' Fidelity Online Brokerage was the first to bring wireless services to market when it introduced two-way paging in January.
Customers can place trades, get real-time quotes and market updates via a pager. They also can have alerts "pushed" to them, such as when a stock hits a certain trigger price -- a service Fidelity already offered via fax, e-mail and so on.
Fidelity became the only brokerage application built into 3Com's Palm VII organizer when that rolled out in October. Only 5,500 customers use either the pager or the Palm, but Fidelity thinks that will pick up rapidly.
In focus groups, close to 40 percent of its customers said they'd missed a market opportunity due to lack of information. Fidelity also is working on cellphone and smart-phone wireless trading.
Like Fidelity, Morgan Stanley Dean Witter (MWD) Online, formerly Discover Brokerage Direct, premiered a wireless program in August, but through 3Com's Palm III. It also lets customers execute trades, get quotes and look up research through the wireless device.
Banking better received?
Meridien faults companies that focus too much on devices such as Palm organizers, which have spotty coverage limited to the biggest metro areas and are expensive. For equipment and a subscription fee, first-year costs run $600 to $750, relegating them to a tiny niche market, albeit a rich, tech-savvy customer ideal for banks.
There's another problem, according to Chris Musto, who tracks online banks for Gomez Advisors. Stock trading is research-heavy and deliberative. The most active customers also require lots of immediate information, and the only way they can open, say, 10 screens and get Level II quotes is on a computer.
So wireless devices may appeal to active, gadget-happy traders. But they're most useful only in conjunction with Web-based research, to offer alerts for decisions a trader already made. And they're unimportant for the wave of customers now opening online accounts who are looking for planning tools.
"The thinking may be, people are going to be getting Palm Pilots anyway and smart cellphones anyway, so let's build to it. But it doesn't really suit anybody's needs" for stock trading, Musto said. "But in banking it does suit people."
The information is simpler, and you're more likely to check your balance, if a check has cleared and then pay your bill that way, he thinks. Or transfer money from one account to another, to pay for an important dinner at a place that doesn't take credit cards, for instance.
Wireless U.S. banking options limited
Charlotte, N.C.-based Bank of America is the furthest along. In October it began letting its online-banking customers in California use the Palm VII to access their accounts without having to use a computer or a phone. But they're limited to checking their balance and account activity, and only a fraction of its 1.6 million online accounts have that access.
Bank of America (BAC) is developing technology for more-extensive wireless banking via mobile phones, smart phones and other hand-held organizers. It plans to pilot the service, which will let customers transfer money and pay bills as well check their accounts, in 2000.
The only other bank that has made significant strides in that direction is Citibank, which like Bank of America and the Bank of Montreal is working with the Toronto-based company 724 Solutions Inc. Citibank, a subsidiary of Citigroup (C), and BofA have the large, urban customer bases to make the investment worthwhile. And Citibank plans to introduce its wireless product in Asia first, perhaps before the end of the year.
Expect interest but not much movement in bringing U.S. customers wireless digital banking over the next two to four years, Meridien concluded. Though many banks and analysts see the potential of wireless, the Internet is likely to continue to be where U.S. banks make their push.
Bruene, the newsletter editor, agreed. Unlike in Europe or Asia, it's not clear U.S. banks would pick up customers they can't already get on the Net. "It's an interesting avenue. It's just a smaller niche than other things banks are doing," he concluded.
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