Wireless: great hope – or great hype? That question is generating more than heat. It's creating a conflagration as pundits weigh in with radically different visions regarding the future of wireless banking. The big question on everyone's lips: Is wireless a passing fad or is it the killer app that will revolutionize the industry? Wireless isn't the next big thing. It's the next huge thing – a revolutionary new delivery channel that will surpass the Internet in the B2C gold rush.

As we witnessed with the Web, financial players who sit on the sidelines may be hard-pressed to join the game once the crowd has started cheering for the winning team. As financial institutions ponder entry into this important new market, they would do well to consider not only how they overcome the challenges of the medium, but also how they can exploit its unique characteristics.

Size Does Matter

Wireless will cause providers to rethink how they package information and services for screens that can be as small as one square inch. Users won't sit still for audio promos or invasive pop-up ads and will demand content and services that are tightly edited and customized to their interests. Consequently, "warmed over" content scraped from Internet sites won't cut it with customers. Financial marketing gurus will need to consider how they can distill information and services to their essence – but still motivate customers to make instant transactions.

It's All in the Name

Another key consideration is where financial institutions will line up on screen menus. Rumor has it that Internet giants such as AOL, MSN and Yahoo! are already paying dearly for the privilege of being listed near the top, though no one's naming figures (at least for now). To be a serious contender, mobile commerce wannabes will need to cover the waterfront, cutting deals with multiple providers for multiple devices. As a result, if you're lucky enough to get short listed, it will be costly to maintain a presence on the most limited electronic real estate to hit the market to date. It's probably critical since 75 percent of the users of i-mode, the most successful wireless service in the world, stay close to the opening screen. Companies such as Sprint, AT&T and Verizon stand to become global behemoths by controlling who is listed on the primary screen, as well as where.

PDA: It's Now Okay in Public

While wireless technologies embrace multiple devices – pagers, personal digital assistants (PDAs) and other handhelds among them – cell phones are leading the charge and will continue to do so, because they do double duty as both voice and data ports. Nevertheless, financial institutions should provide content for all devices or risk losing customers. PDAs, for example, will likely always remain a niche market; however, PDA users tend to be affluent, a customer group banks covet.

Financial institutions would do well to follow Zagat's example. The travel and entertainment company is writing 19 sets of code for the U.S. Palm Pilot market alone.

Set Some Standards

Wireless's head start abroad is due primarily to the fact that Europe is all on one standard – GSM – thanks to a European Union mandate back in the eighties. North America is another story, contributing to a mishmash of standards – CDMA, TDMA and GSM for starters. Banks looking to provide wireless services are forced to sort through the technology jungle and pick a standard, knowing they won't reach all of their customers. Fortunately, there's a new technology that's bridging the gap: wireless application protocol (WAP). This software acts like a microbrowser and pipes in data, regardless of what wireless device or network protocol is being used.

Speed: The Sequel

Detractors complain about wireless's slow transmission speeds. Currently, users acquire data at 9.6 or 14.4 kilobits per second, while even the slowest PC modems transmit at 28 kilobits per second. Consequently, surfing the wireless Web can be a painfully slow process, dampening a user's enthusiasm for acquiring even the most rudimentary data. While the transmission problem won't be totally solved until 3G arrives – which transmits at speeds ranging between 384 kilobits and 2 megabits per second – interim solutions will provide the necessary kick start. By next year, providers should have implemented connections ranging from 115 to 144 kilobits, eliminating the traffic jam currently bottlenecking the wireless information highway.

If You Build It ...

Financial institutions, which have spent hundreds of millions of dollars on Web infrastructure, probably don't relish the prospect of investing heavily in an unexplored medium. Fortunately, costs are dropping. Last year's estimate of $1,000 per subscriber in wireless network development costs has already dropped to $350, according to Business Week. And to delay is to risk losing out on what many predict will be the biggest delivery channel of them all. The Inter- national Data Corporation forecasts that wireless Web users will outnumber their wired counterparts by as early as 2002.

As wireless networks proliferate, bandwidth becomes a precious commodity. Some providers are already at capacity and will need to purchase big chunks of spectrum if they are to stay competitive. They'll pay dearly for this privilege. Last year's wireless auction in Britain cost the winning bidders $35 billion, says eCompany. While financial institutions won't be competing in the battle of the bandwidth, they will feel its sting as telecommunications providers pass along the costs of capturing this expensive prize.

Without Wires

While wireless adoption has been explosive in Europe and Asia, it has lagged behind in the United States. Adding to the dilemma is the pervasive use of analog phones which can't support data transmissions.

But North America will begin to catch up, and sooner than you might think. Digital cell phone users will jump sixfold in the next two years – up to 84 million by 2003, says Meridien Research. And these numbers will skyrocket again when 3G is rolled out here, which should happen by late 2003 or in 2004.

By 2006, there will be 1.5 billion mobile users worldwide, nearly half (684 million) of which will use their devices to surf the Internet, says the research firm Ovum. But will wireless usage translate into revenue? Will it provide financial institutions with the transaction-heavy, valuable customers they've tried to cultivate via the Internet? Industry analysts say yes on both counts. Although it's anybody's guess at this point, Industry Standard believes mobile commerce revenues will climb to $83 billion by 2003. Financial services will have a significant piece of that pie. By 2003, more than 40 million people worldwide will use wireless banking, according to the International Data Corporation.

As financial institutions navigate the technological and financial challenges posed by this new medium, they also need to create services that capitalize on its unique attributes, much the way they worked to leverage the wired Web's capabilities. Wireless has several qualities that will make it extremely attractive to customers on the go – in short, everyone.

The best solutions will capitalize on cell phones' unique marriage of voice and data. Voice is the simplest and most effective human interface of them all – one reason Web vendors are rushing to add telephony to their capabilities. According to Business Week, some 80 percent of customers who initiate a Web-based transaction quit before completing it. By providing voice support, providers for both the wired and wireless Web will boost transactions. But cell phones, the dominant player in the wireless market, will have an edge over Internet telephony because of their ease of use, portability and targeted information "sound bytes." Voice recognition technologies, which are reaching maturity, will counterbalance one of wireless's primary drawbacks – its diminutive keyboard and screen size.

Within a little more than a year, cell phones will provide financial institutions with data they could have only dreamed about possessing: users' location on a 24x7 basis. By October 2001, all wireless carriers in the United States are required to have tracking systems in place that can track two-thirds of cell phone callers to within 120 meters to comply with a Federal Communications Commission mandate. Wireless's geographic sensitivity is a marketer's heaven. Will you offer a credit extension to a customer who's touring Europe? Pitch traveler's checks to a customer who's walking through Chicago O'Hare? Offer enhanced car insurance to a traveler who's driving through the Rockies? Or just help someone find the nearest ATM? Only time will tell, but banks should move quickly to exploit this rich store of marketing data. One company has already entered the market. GeePs.com began testing location-based services in New York and San Francisco in April. Of key importance is permission marketing. Customers will help drive marketing by telling banks what they do and don't want to receive.

On the Go

Wireless devices will usher in a renaissance of 24x7 banking. While the wired Web launched that era, providing round-the-clock access to financial services, it tied customers to their PCs. Now, they will experience an unprecedented level of freedom. No need to dial up, load Web pages and search for information. With your wireless device, you can access data while riding the train, walking down the street or waiting in a restaurant. A world of financial information and services will be in your palm anywhere, anytime.

Wireless users will like the control and ease of obtaining and reacting to information that's packaged for them in "bite-size pieces." Having crucial data available at their fingertips will cause customers to become more spontaneous, making instant decisions, whether it's transferring funds to avoid an overdraft, buying and selling stocks or simply paying bills. Banks would do well to deliver more products and services over wireless devices, where accessible customers are just a click away.

Finally, cell phones provide something PCs cannot offer – companionship. Portable, user friendly and powered by voice, they will reach customer groups who have never tapped the wired Web as well as expand opportunities with those who have. The emotional attachment people have to their phones cannot be overstated. A phone is much more than a resource. It's a friend. Banks that can find a way to capitalize on this attachment will be successful indeed.

What's Happening Overseas

Inspired by the pervasive use of wireless overseas, European and Asian financial institutions have launched full-scale wireless initiatives. Leading the pack is Finland's Merita-Nordenbanken. Early into the market – the bank offered rudimentary wireless capabilities as far back as 1992 – Merita now boasts 200,000 wireless transactions a month, according to Meridien Research. Wire-less programs are ramping up in France, Germany, Switzerland, Spain, Portugal and the U.K., for starters. But the best test case for the potential of wireless comes not from a bank, but from a service provider – Japan's NTT DoCoMo. Rather than wait for the government to impose a single standard, NTT DoCoMo rolled out its own – i-mode – and garnered 7 million users in a little more than a year. Vendors have responded. More than 12,000 Web sites have been launched or adapted for this service. Consumer interest has been so overwhelming that DoCoMo has cut shipments of phone handsets in half and canceled all marketing to buy time to expand its network. Even so, another 20,000 people a day are signing up, and i-mode hasn't even hit its stride yet. The service, which currently transmits data at a positively pokey 9.6 kilobits per second, will get its second wind when it switches to 3G next year, the first in the world to do so. Some analysts predict that Japan will skip the wired Internet and head straight to wireless for most of its financial services.

On the other side of the ocean, promising results from a high-profile pilot program prompted Canada's Bank of Montreal to launch Veev as a full-scale service in several regions. Its Chicago subsidiary, Harris Bank, is following suit. A full-scale program should be operational this summer. Citigroup and Bank of America are close behind. Both will debut wireless programs this year.

It's hard to believe the wireless game is still in the early innings, since most of the world's heavy hitters have already lined up for their chance to bat. There's still time for banks to suit up, but time is of the essence. To sit on the sidelines is to miss the most exciting sweep to hit business since the Internet.

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