The Future of Financial Services Is...Wireless?
By Geoffrey Smith
Conventional wisdom has it that wireless financial services projects should be put on the back burner now that the economy is weak and capital spending budgets are being squeezed. I'm not so sure. It's true that most consumers could care less about wireless financial services right now. But they also didn't care about online stock trading before it became simple, convenient, and cheap.
Fidelity Investments recently gave me a glimpse of its vision of the future of online financial services, and the cool factor is high. Using a Web-connected cell phone, one of its technology gurus demonstrated a stock-research system based on voice commands. With the phone connected to a server in a Fidelity research lab in Ireland, the developer said, "Get me net earnings and gross margins for Ford and General Motors for 2000 and 1999." Within seconds, a little table popped up on the cell phone with the requested numbers.
Assuming this can be made to work outside a lab, it will be a handy tool for Fidelity fund managers and analysts who need to do stock research on the run. But for investors and consumers, does it really matter? In a market as brutally competitive as financial services, it will. The novelty and convenience of using voice commands to call up information about stocks could be a selling point that will tip the balance when investors make their decision on which firm to use for an online account.
The availability of other more useful wireless functions will spur interest as well. Wireless financial services need a catalyst -- a service everyone needs. It won't be stock research through voice recognition. What the market needs is a simple wireless-payments system that lets people buy things using their cell phones.
It might work like this. You give a retailer, a taxi driver, or a friend your cell-phone number. They use their phone to call a payment service and enter your phone number. You get a phone call with a confirmation message and the amount of the purchase or transfer. You type in your password, and the transaction is done.
Once a ubiquitous payment system emerges, consumers will begin to feel more comfortable using wireless devices for financial transactions. When people start buying things with their cell phones, there should be only a few more buttons to push to access brokerage and bank accounts, transfer money, and research stocks.
It's no sure bet the U.S. will figure out a wireless-payment system. Banks and credit-card companies dictate how money changes hands, and unless they can make money in thin air, they'll resist.
That means the market for wireless financial services may develop even more slowly than it already has. It doesn't help that some basic technologicial barriers give everyone pause. My AT&T cell phone cuts off all too often when I use it around Boston. And with their tiny screens, AT&T's Web-enabled phones are hardly useful. And I don't want to pay $400, plus $10 a month, for a Palm VII with Palm.net access.
In the short-run, brokers and banks that are considering adding wireless services simply as an added convenience for customers may just be increasing costs without adding revenues. But here's something else to consider. At Fidelity, stock trading is off more than 50% from its peak last year, but the number of customers signing up for wireless access has increased every month from its launch two years ago through May, to nearly 100,000. I may be wary about wireless, but plenty of people are eager to use it.
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Smith covers online finance from BusinessWeek's Boston bureau