Bank of Montreal has shut down its wireless banking service in Canada, bursting the bubble of expectations that has surrounded mobile financial services.
The Toronto-based institution, the first major one in North America to offer wireless, had staked a good deal of its reputation on being the leader in mobile banking, going so far as to "white-label" its Veev wireless service for other banks. It had also joined several other banks in backing 724 Solutions, a Toronto-based mobile technology company. And through its U.S. subsidiary, Chicago-based Harris Bank, it looked to be the leader in wireless in all of North America.
But the bank concluded that demand simply wasn't there. "Consumer adoption and usage of wireless technology has been slower than anticipated," said JoAnne Hayes, a spokeswoman for Bank of Montreal. "It hasn't reached the critical mass required to sustain the costs."
Harris Bank will continue to operate its wireless brokerage service, Harris Direct. BMO Investor Line, a direct brokerage service in Canada, is leaving wireless but will reenter the market shortly, Hayes said.
Although many banks offer customers the ability to view account balances and stock quotes, transfer funds and even pay bills on their mobile devices, there have been few takers. In the United States, only about 150,000 people use wireless financial services, down from a peak of over 200,000 last year, according to Celent Communications.
Canada has about 75,000 users-half as many as the U.S. in a country one-tenth the size. Hence, the decision by Bank of Montreal to shut down its wireless service in Canada while continuing it in the United States is an anomaly. "It was a bit of a surprise in the sense that Canadian banks have shown a greater commitment to wireless despite immature technology and a lack of consumer demand," said Celent analyst Michael Haney.
In April, when CIBC became the latest Canadian bank to introduce a wireless service, it cited demand for wireless banking among tech-savvy customers and on-the-go workers. "With 1.5 million CIBC customers registered for online banking, we see wireless service as part of the ongoing evolution of Web-enabled self-service options," said Pattie Robb, senior vp of retail markets at Toronto-based CIBC, in a statement at the time.
Despite the low number of users, some analysts have continued to make rosy projections, with GartnerG2 predicting 7 million U.S. users by 2005, rivaling adoption rates in Europe and Asia. But a host of obstacles lie in the way, according to a report by Celent's Haney. As North American banks tighten their IT budgets, spending on wireless technology has been scaled back from $80 million in 2000 to an estimated $20 million this year. And with the exceptions of E*Trade, Charles Schwab and Fidelity, U.S. institutions have had no more success with wireless brokerage than they've had with wireless banking.
Still, wireless financial services continue to be offered, especially by institutions with large numbers of mobile customers. The Delta and Motorola credit unions, for example, last year introduced wireless services in conjunction with Air2Web, an Atlanta-based mobile services supplier. Motorola-whose Internet banking supplier, Digital Insight, made its system compatible with Air2Web's-has achieved a penetration of 3.3 percent, or 630 wireless users, including approximately 200 to 250 members relying on PDAs.