Wireless Finance: Look who’s not talking

Go figure: A billion people worldwide now subscribe to cellular telephone services, 250 million more than in 2000, yet the industry is in dire straits. Basic voice service has become an unprofitable commodity, and wireless operators’ attempts to raise revenues by selling premium data services -- the mobile Internet -- haven’t paid off. Few cell phones have morphed into minibrowsers, consumers resist paying extra for content, and investors aren’t trading stock on the run.

Go figure: A billion people worldwide now subscribe to cellular telephone services, 250 million more than in 2000, yet the industry is in dire straits. Basic voice service has become an unprofitable commodity, and wireless operators’ attempts to raise revenues by selling premium data services -- the mobile Internet -- haven’t paid off. Few cell phones have morphed into minibrowsers, consumers resist paying extra for content, and investors aren’t trading stock on the run.

Still, below this bleak surface there are signs of a pickup in demand for mobile data services, particularly in the financial industry. The trend has gone largely unnoticed because it centers not on overhyped consumer banking and brokerage offerings but rather on internal uses like instant messaging and market data.

The numbers are a drop in the global cellular bucket, but they are climbing fast: Needham, Massachusettsbased research firm TowerGroup says that financial industry employees using internal, or enterprise, wireless applications will more than double this year, to 1.1 million worldwide. That will include about 300,000 in North America, up from a mere 5,000 two years ago. Since the September 11 terrorist attacks, when Wall Street firms depended on handheld devices to reach displaced employees, financial companies have been quietly incorporating the technology into day-to-day operations.

More than 1,000 executives at Fidelity Investments, for example, routinely e-mail each other over BlackBerry devices made by Canada’s Research in Motion. And Boston-based Fidelity is installing wireless local area networks in its buildings, enabling computers to connect into company systems without cables.

Citigroup’s Salomon Smith Barney unit supports 6,000 BlackBerries and 3,000 Palm organizers for bankers, equity analysts and traders. Salomon is extending wireless services to buy-side clients and will accept trade orders from them -- but the firm won’t say much beyond these details. Whether because they are in early test phases or don’t want to tip off the competition, investment bankers prefer to stay in stealth mode.

“I have two pilots going in New York, but I can’t tell you who [the banks] are,” says Andres Carvallo, chairman and CEO of Austin, Texasbased HillCast Technologies. The two-year-old company streams market data to several thousand U.S. wireless subscribers and sells individual trading, block trading and portfolio management applications to institutions. “We have the same architecture and security as on a desktop,” says Carvallo. “The only question is, Do you want to trade at the desk or be free to move around the office?”

That’s not quite the only question in a time of austerity, asserts Steven Hoffman, head of the financial services consulting practice at Cambridge, Massachusetts-based Sapient Corp. “People in general are questioning anything that even sounds speculative,” he says. “There’s a lot of untapped potential in wireless. We are investing heavily in it, but we’re not seeing a lot of movement.”

Improvements in devices and in wireless-network coverage make internal or enterprise applications easier to justify, says Robert Lotter, CEO of Newport Beach, California, sales-force automation company EAgency Systems. “Companies can now identify returns on investment that were previously possible only in a few select markets,” he says.

Given the closer attention to internal ROI, TowerGroup expects 65 percent of U.S. financial companies to have enterprise wireless systems in 2005, versus only 35 percent with mobile retail services. EAgency’s Lotter sees 1 million potential enterprise wireless users in the U.S. insurance and brokerage industries alone; EAgency is working on a 170,000-agent wireless project for one large insurer, which he declines to name. Insists Lotter, “What we see is just a trickle compared to the potential size of the business.”

Related