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Wireless Financial Services Plod Along

Most financial-services firms are cutting back on wireless development but some are still plugging away.

A tough economy has most firms putting wireless financial services on the back burner but some continue to make progress.

Wireless initiatives in the brokerage industry have hit a lull, but firms that have a big commitment to the space continue to move forward. "From what I see today, it definitely peaked in 2000 in terms of IT spending on wireless," says Michael Haney, an analyst at Celent Communications in New York who tracks wireless developments in the brokerage business.

"It's not the time to be spending a lot on wireless," he says, noting that there hasn't been the "mass adoption we all sort of predicted."

Ed Kountz, an analyst at TowerGroup in Needham, Mass., says that North American wireless spending by financial institutions at the moment is flat at an estimate $41 million this year, compared to $43 million in 2001.

Kountz says it's a tough environment for an emerging channel to survive. "When times are tight, firms want to see a shorter return on investment."

What little action there is, he says, can be found at larger financial institutions. On the brokerage side, firms are still committed but they're not introducing new functionality, he says. We haven't seen the large number of small-to-mid-sized firms engaging in mobile yet. It tends to be larger firms and (some) mid-sized firms."

Celent's Haney adds that with the tougher economic times, a lot of wireless divisions at firms have been "rolled back into the overall strategy and are no longer a separate entity." As well, he has seen staff reductions and cutbacks in the wireless space.

His recent numbers indicate that there are only 50,000 active wireless users in North America, which makes it difficult to build a business around.

Nonetheless, larger, established players in the wireless financial-services space say it's business as usual. Bob Sofman, senior vice president of global-wireless solutions at Charles Schwab in San Francisco, Calif., remains optimistic about wireless. He notes that in just two years since Schwab launched its wireless initiative, it has garnered 135,000 registered users and between 30,000-35,000 of those are "active" users, he says, adding that Celent's numbers seem "awfully small."

Wireless, he says, is a "good channel for us and an integral part of our multi-channel approach. Our strategy hasn't changed appreciably."

While the buzz around wireless has dropped to a whisper in the past year, he says it's important to remember that the space is "relatively young and immature from a technology standpoint. As the technology matures, applications are going to become more sophisticated. The user experience is going to become easier and more friendly," which will drive adoption higher.

Already Sofman is seeing advances in wireless that he didn't expect this early in the game. In the spring, he demonstrated to his boss a wireless-streaming-content and audio presentation using a Pocket PC. Sofman says he never expected to be able to do that till the end of 2002 or early 2003.

He says there's been "significant development on the network and handset side, more so than I personally would have projected." The developments include the rollout of 2.5G networks by carriers during a telecommunications slowdown and vastly improved handheld devices, which he says will drive wireless forward.

Joe Ferra, chief wireless officer at Fidelity eBusiness, says his firm is "moving aggressively" to spread wireless across the Fidelity enterprise. That means making sure that each division of Fidelity can deliver its service over a wireless device.

For example, BostonCoach, a Fidelity company that provides ground transportation, recently launched a wireless service for booking limousines, buses or vans using a Web-enabled phone or personal digital assistant.

As well, Fidelity has extended wireless to its NetBenefits offering so that users can get information wirelessly about things like retirement plans. "Our focus has been on more than just trading and retail brokerage. We want to expand and leverage the entire enterprise." He says Fidelity will expand wireless into its insurance offerings and its hotel, the Seaport Hotel.

Ferra says when he looks at the demographics around wireless he continues to see a "very desirable customer."

According to Forrester Research, typical PDA owners who are interested in financial services are 38-year-old males, earning on average $117,000 and have investable assets of $505,000. They do 12 stock trades a year and 3 percent claim to have a margin loan. About 55 percent report buying stocks via the Internet.

That compares to cell phone owners interested in wireless financial services. They're 39-year-old males earning on average $87,000 and have $376,000 in investable assets. 4 percent have a margin loan and they also do 12 trades a year. About 33 percent report buying stocks through the Internet.

One of the problems with delivering wireless financial services to the market, Ferra says, is that "a lot of people have made this overly complex and not delivered on what the end user most values," which has hurt the user experience and dampened enthusiasm for wireless.

Wireless, he says, "has to be easy to use." Moreover, it must entail personalization and be rich in content. As such, Ferra says there's a "lot of promise around alerts," which can meet these criteria.

Briane Keane, president of the enterprise solutions at wireless-applications developer Aether Systems, Inc., which includes financial services, predicts "intelligent alerts" will be the next rage in wireless. At press time, Aether was beta testing an intelligent-alert system with an unnamed Wall Street firm. It will allow firms to notify clients when selected stocks hit a range of triggers, such as 52-week highs or exceed average-trading volumes.

Eventually, he says, that will be followed by actionable alerts, which will allow users to trade based on the information they receive. He figures that's about "a year away."

Nonetheless, brokerages continue to remain cautious in advancing wireless, he says, although in terms of providing wireless connectivity to employees, he's seeing more activity.

"Most of the large firms have, at a minimum, significant wireless e-mail deployments and, to a lesser degree, are giving their employees access to market data. It's been fairly simple e-mail and Web access."

When it comes to the business-to-consumer space, however, he says, "We haven't really seen a large pick up in activity."

Celent's Haney says a lot has to happen for wireless financial services to take off in the consumer space. The infrastructure has to speed up and carriers have to move to 2.5 and 3G networks, which is slowly underway. More importantly, though, "Consumers need to upgrade their devices."

Sofman adds that one of the biggest challenges financial firms currently face in the wireless-enterprise space is coping with "the tremendous number of competing standards that exists. There's a proliferation of competing standards that causes development efforts to be somewhat complex."

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