July 25, 2002

Financial institution and customer ardor for wireless banking services has definitely waned, according to a recent Celent Communications report.

The study, entitled No Signal: North American Wireless Retail Baking & Brokerage said that wireless banking and brokerage transactions peaked around .25 million users in 2001 and has been on a steady decline since. Now, less then .5 percent of mobile phone subscribers are taking advantage of these wireless programs and many original users no longer actively partake in the services. Although many firms decline to release the number of wireless banking subscribers, Celent estimates most institutions only have 5,000 to 10,000 active users.

Due to low usage numbers, there has been a 66 percent drop in spending on wireless technologies and related services. In many cases, banks have stopped or postponed creating and expanding new and original wireless projects.

According to the survey, there are many reasons for the disappointing wireless technology results. One factor is the recent recession. With the stock market value dropping, many consumers are looking into alternative investment routes including bonds, real estate or CDs. Since customers are not placing their savings and money into Wall Street, there is less daily trading which means there is less urgency to be able to access stock and bank accounts on the go, leading to a lesser need of wireless banking technology.

As the recession deepened, banks and brokerage firms with shrinking profits had to tighten and restructure their technology budgets. Instead of expanding and redesigning wireless systems and spending money on advertising wireless programs, banks instead placed money into improving already existing distribution systems such as branches, call centers and ATMs. With less advertising, a smaller percentage of people knew about wireless banking and available features.

Another reason for the failure of wireless banking involves Americans' mobility patterns. American society is not set up in such a way that allows wireless banking to be easily incorporated into everyday life. Most Americans are an extremely car-dependant especially commuting to work. In Japan, where some companies have wireless banking user bases that represent 10-20 percent of their online customer base, more people use public transportation as their main traveling means, so they have ample free time to access wireless banking.

The needless complexity of many wireless banking systems may also have led to the technology's downfall. Indeed, many of the features that were available wirelessly were not necessarily needed as wireless functions. "We kind of blindly put functionality from the web onto the phone and realized that some of these things aren't urgent," said Michael Haney, senior analyst at Celent and author of the report. "People don't need to perform some of these transactions right away so they were not used."

Haney added that at the moment, "Competitive market pressure to go wireless is off." But he does not think that the concept of wireless banking is dead. Instead he says that once network coverage is updated, more necessary programs are available and the recession ends, customers might once again see the need of accessing their stocks and accounts on the run.

For a copy of the report, visit www.celent.com