US banks slow to follow brokers in WAP services

Now that most of the United States' major brokerages have given account access to customers through wireless devices, the question remains when will banks catch up?

Banks are clearly eager to pursue this new customer access channel which, depending on whom you believe, will either be the way people handle their finances in the future, or is just something of a fad.

Most people can see that mobile telephones and handheld personal organisers have become staggeringly popular. According to Jupiter Communications, there are a million wireless devices in use in the United States, and the US wireless data subscriber base will exceed 100 million by 2003.

Recently, Charles Schwab & Co announced it was offering its PocketBroker service through wireless handheld devices made by Palm. Not to be outdone, Quick & Reilly, the discount brokerage, announced it was offering wireless securities trading on "virtually every major wireless device".

A third brokerage, E*Trade Group, as part of its E*Trade Everywhere strategy has signed agreements with GTE Wireless, AT&T Wireless Group, OmniSky, Verizon Wireless, OracleMobile.com and Everypath, a wireless technology enabler.

Brokerage seems like a natural place for wireless services to take off. It caters to customers who demand speed, and the amount of information they need can be accommodated on tiny screens and limited keypads. But offering full-blown banking services on these devices has proven a tougher task and banks - perhaps in part because of their characteristic scepticism about new technologies - have held back.

But they are making some progress. Out in front is Bank of Montreal, which became the first bank in North America offering wireless transactions when it introduced a service called "Veev" in Canada last year. In March, it began a pilot at its US subsidiary, Harris Bank in Chicago. In the pilot, called Harris Wireless, it gave Sprint PCS phones to 100 customers.

"The barriers we saw a year ago were that the phones were too big and the screens were too small," said Mr Mark Dickelman, vice-president of mobile commerce and wireless for Bank of Montreal and Harris Bank. He said Veev, which gave users full access to their accounts in real time, let people pay bills and trade stocks, and was tailored to the screen of a phone.

The project started with 500 customers in Toronto though the bank has not announced customer numbers since then. Large US banks, such as Bank of America and Citigroup, are likely to introduce wireless services this summer.

In a pilot that started in October, Bank of America has been feeding account information to its California online banking customers over the Palm VII handheld device. The bank says it will soon roll out transactional services on both organisers and mobile phones.

One obstacle to widespread delivery of wireless applications in the US is the lack of a universal standard. In Europe and Asia, wireless phones have been built on one digital standard - the global standard for mobile communication (GSM). The Wireless Application Protocol (WAP) is also a widely accepted protocol for writing Internet applications on mobile phones.

Because GSM and WAP are in greater use overseas, several US financial institutions are testing wireless technologies abroad first before bringing them back to America.

The US must be the "only country in the world where PC penetration is higher than mobile phones", said Mr Alan Young, vice-president of access devices and distribution technologies at e-Citi, Citigroup's mobile division. Mobile phone penetration in the US stands at about 27 per cent of the population, compared with about 60 per cent in Europe.

"This will change," Mr Young said. "You'll see an explosion of phones here, and that's good for us. We'll figure out how to use this technology elsewhere first, and then bring it home." Citigroup has already begun tests in Poland, Singapore, Hong Kong and Japan.

Mr Greg Wolfond, chief executive officer of 724 Solutions Inc, a software company in Toronto that sets up wireless services for financial institutions, said the "level of knowledge and appeal has grown" for his company's services. "The cost of wireless data services is dropping to the floor," Mr Wolfond said. "All of a sudden, we're getting to cost points of about three cents a minute, which make it make sense. It's so darn easy for consumers, they'll do it like they use ATMs."

Mr Wolfond said banks and brokerages were working in parallel. "They're trying to see what applications clients like." While as yet all capabilities do not necessarily run on WAP, "we're well-positioned as WAP gets standardised and implemented," said Mr Dickelman of Bank of Montreal. "It's like a stepping stone."

He said much of the activity in Europe was taking place on a second-generation short messaging service "which has a slow response time, limited functionality, and relies on the GSM network that is not universally deployed in the US. It also requires banks to provide a phone or SIM (subscriber identification module) card to their customers".

For example, Allied Irish Banks and Leonia Bank in Finland offer their customers SIM cards for extra security.

Although Bank of Montreal did evaluate a short messaging service toolkit, Mr Dickelman said: "We would much rather push browser-based services, which offer direct Internet access from phones. These have become available only recently."

Mr Dickelman said he thought the US had jumped in front of other countries in wireless Internet service, with about five million devices available and several carriers selling them.

"In North America today, we've got strong capability with our existing networks," he said.

Now that most of the world's telecommunication carriers have agreed on a third-generation standard known as 3G or UMTS, "North America is more strategically placed", Mr Dickelman said. He said there were also rapid advances in the speed at which data were being transmitted.

Many software vendors are working toward distribution of information over any network and any device. "One minute you're working on your PC, then you leave your office and you're doing the same thing on the phone," Mr Wolfond said.

Citigroup's approach was to build a "network and device-agnostic platform," said Mr Young. "A device is a device and a bank shouldn't care what device a customer uses. All we need to know is that it's a remote customer who wants to do business with us."