Boom, Bust…What’s Next?
January 2004 - By Douglas McWhirter


Brokers complete last minute trades on wireless handhelds as they run to catch airplanes! Bankers receive loan requests on their PDAs and zip off approvals to mobile phones held by happy home buyers! Commodities traders carry out secure, instantaneous transactions—real-time pork bellies?—anywhere, anytime!

Only three years ago, both mobile technology vendors and the financial services industry shared these heady visions of a fully mobile finance sector.

Unfortunately, the vision never quite became a reality. Recent studies indicate that the financial services industry has been particularly cautious in embracing mobile technologies. Sure, finance professionals have their RIM BlackBerry devices and Palm PDAs like everyone else. But research has shown that, to date, they are overwhelmingly being used for administrative tasks—not for carrying out unique industry missions with specialized software.

So is the vision dead or just delayed? The latter, say many industry experts. “In application areas where the needs of financial services professionals are coincident with the needs of any mobile professional, the story is pretty good,” says Richard Bell, research manager for retail channels at Financial Insights, a division of IDC. “But where they are not, the story gets much rockier pretty quickly.”

The Tail Wags The Dog

Bell, along with Financial Insights colleague Ross Sealfon, recently completed a two-part study of the mobile and wireless sector that illuminates the reality of how these technologies factor in financial services. In part one, titled Wireless Financial Services: Technology Trends, they write: “The brief history of handheld wireless financial services (1999 to 2003) is a classical technology bubble story of early enthusiasm and boom, followed by rapid bust and despair. It is an almost prototypical story of the tail, technology, wagging the dog, the financial services industry.”

This “prototypical story” features a traditionally conservative industry that identified several potential uses for mobile/wireless technologies. These uses included mobile workers interacting with portable applications and, even more ambitiously, consumers connected remotely to their accounts.

Mobile technology vendors, to no one’s surprise, embraced a more aggressive vision that featured financial professionals from banking and brokerage houses to insurance performing virtually all their tasks on the go—a vision that, it would turn out, could be supported by neither technology nor extant business processes.

“Today only a handful of the many thousands of financial service institutions in North America offer wireless financial services in any form,” write Bell and Sealfon. “Once enthusiastic, large financial institutions have continued to abandon experimental projects.”

Furthermore, wireless offerings for customers—such as payment services or alerts on account performance—remain extremely limited as well. In research that corroborates Bell and Sealfon’s findings, Boston-based IT research organization Celent reports that the total number of users actively conducting banking and brokerage transactions peaked at roughly a quarter of a million in 2001—and has declined since. “The current recession, in conjunction with a nascent but immature technology, and a huge misunderstanding of consumer behavior and wants, has brought wireless banking and brokerage into a state of rapid decline,” says Michael Haney, a senior analyst at Celent.

Lessons Learned the Hard Way

So what went wrong? Speaking with Mobile Enterprise, Bell elaborates on this issue by saying that “for all the enthusiasm attached to wireless financial activity, it is important to ask about the value proposition: Is there a real need? While the technology is intriguing, at the end of the day it is not as useful as it is interesting.”

In other words, professionals working in the financial services industry didn’t really need to do their jobs remotely. Like everyone else, they do need to check their e-mail remotely, but as for more complex tasks, the power of existing systems and processes often render a mobile option redundant. “These people just aren’t moving that much,” says Bell. “A broker might trade at lunch, but does that really make sense? He has a very powerful system and a team of folks back at the office seeing that his business is being tended to. Why would he do it at the lunch table on a device that has very little power?”

Another drawback is the lack of a broad standard for different financial verticals. Consider the ease of checking e-mail or calendars on a handheld. Because of widespread adoption, there are standard programs that interface seamlessly with other personal information management systems and perform well. In banking and brokerage services, no such standard exists. In fact, many of the business-critical applications that financial institutions use are developed in-house, and are considered in their business models to be competitive advantages. “Why would a brokerage create a standard that would allow all brokerages to compete on equal footing?” asks Bell.

Furthermore, developement of broad applications is stymied by access to current applications via the Internet. By dialing in, mobile financial professionals can access most if not all company applications. Why invest in the development of handheld-based apps when your workers can already access their accounts from the road?

Down, But Not Out

Despite the sobering state of mobile financial services technologies, there is some slow, cautious activity in this area. Mobile Enterprise recently spoke with two financial services institutions that are furthering a commitment to mobile technologies. While they have yet to adopt the latest in handhelds, mobile phones and two-way pagers, their technologies and systems offer a much more realistic view of the current state of mobile tools and technologies in the financial sector today. Furthermore, in these systems, each company finds value and cautiously anticipates future system enhancements.

The first is Foremost Insurance Group, a Caledonia, Mich.-based insurer of mobile homes, travel trailers, specialty vehicles and watercraft. Foremost uses mobile technology for very practical uses, such as the dissemination of company data to its sales force in the field. This data, which includes monthly sales reports, had become voluminous to the point of being unmanageable, particularly for those reps in the field who did not have access to main office systems. “Our inside and outside sales reps were bumping into each others’ territories on sales calls because they couldn’t share files with account notes,” says Kammi McDermott, Foremost’s agency sales project manager. “We just had too much paper to print up and ship to them, and this manual process was becoming frustrating.”

The answer, says McDermott, was a mobile data dissemination system that gives Foremost reps access to valuable account data, which solves the problem of sales territory overlap. It is part of Client Management Software (CMS) by OnContact, a mid-market CRM vendor. CMS is powered by SQL Anywhere, a mobile data synchronization system from iAnywhere.

Foremost’s system, which may seem primitive to those who see laptops as technological dinosaurs, is fairly representative of the state of mobile and wireless technologies in the insurance sector of the financial services industry. No, it currently doesn’t feature the latest and greatest in handhelds, but it uses existing technologies (laptops, the Internet) to solve pressing problems. And McDermott says she does see an eventual transition to smaller, cutting-edge mobile tools.

The Next Step

One financial services firm that has gone a step beyond your basic laptop/dial-up mobile system is American Century, an asset management firm based in Kansas City, Mo. “Twelve to 18 months ago, we got wind that our mobile users wanted connectivity beyond a dial-up mechanism,” says Jason Van Ness, VP of technical services for American Century.

To meet this demand, Van Ness and his team implemented Surewave, a server-based application from Texas-based JP Mobile that enables organizations to simultaneously support Pocket PC, Palm, Symbian and RIM handhelds. This system interfaces with American Century’s Siebel database, and synchronizes all contact info, calendaring, tasks and e-mail on their portable devices. “This is a real time-saver for the guys who are traveling,” says Van Ness. “Instead of connecting multiple times with laptops, they now use handhelds, which are much more convenient.”

While American Century’s current setup is definitely a step toward providing total access for mobile workers, the handhelds do not support back-office or mission-critical applications. Additionally, the management of mobile devices will, says Van Ness, prove difficult as users become accustomed to the ease of mobility—and become more demanding. “Going forward, it will be challenging to support the right breadth of devices,” says Van Ness.

While companies such as Foremost and American Century are both realizing value in their mobile investments, they, like their competitors in the financial services industry, are moving cautiously into mobile and wireless. Says Celent’s Michael Haney: “Now that the competitive pressure to go wireless has been removed, financial institutions have the luxury of waiting for the technology to mature.” •

Douglas McWhirter is a technology writer and consultant based in Los Angeles.

 


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