Next Up for Financial Services: Wireless

With wireless devices such as mobile phones approaching critical mass, GartnerG2 expects U.S. consumers to begin adopting such devices for wireless financial services.

U.S. consumers using wireless banking services on a regular basis will total more than 7 million by 2005, up from 500,000 in 2001, according to GartnerG2. In 2002, GartnerG2 predicts 1.2 million U.S. consumers will be using wireless financial services growing to 2.6 million in 2003.

Wireless financial services will become intertwined with various types of wireless transactions, the research found. Consumers will routinely use wireless financial services to receive and pay bills, make cashless purchases, apply for credit or services that require identity validation and get cash from an ATM or live teller.

“Compared to many other countries, U.S. consumer demand for wireless financial services is immature, but it’s evolving rapidly,” said Brad Adrian, research analyst for GartnerG2. “Because of the historic lack of reliance upon PC-based Internet connectivity, consumers in Western Europe and Japan have rapidly adopted the use of wireless devices for accessing Internet information. Wireless device placements are reaching critical mass, and U.S. consumers will gradually begin to adopt wireless financial services.”

On the supply side, GartnerG2 found that few financial service providers have launched wireless offerings, and only the largest brokerages – and about 8 percent of midsize and large banks – have taken the wireless plunge. By 2003, GartnerG2 predicts that Americans’ expectations about wireless services will begin to be more adequately fulfilled, rapidly accelerating customer adoption. By 2004, the services consumers expect and the functionality financial service providers offer will synchronize.

The volume of Internet data being exchanged via digital handsets increased between 2000 and 2001, but the use of wireless application protocol interfaces is still very low. GartnerG2 found that only 15 percent of consumers that use wireless application protocols feel the interaction is satisfactory.

“Financial service providers need to anticipate what services consumers will most likely use and how quickly a viable market will develop for such services,” Adrian said. “These providers need to anticipate evolving consumer demand to ensure long-term viability of their wireless offerings. They also need to build wireless systems to be flexible, to be readily modifiable and to fit well within their overall channel strategy. The companies must design wireless offerings to enhance CRM and self-service, not just to generate fees.”

Wireless financial offerings do seem like the next logical step for financial institutions. According to a report by Celent Communications, virtually all major and second-tier banks (banks with at least $30 billion in assets) have implemented transactional Internet banking. Applications included in these platforms include online bill payment, electronic bill presentment and payment (EBPP), account aggregation and online lending.

The Celent report also discovered that financial institutions that implement a comprehensive suite of Internet banking products can expect to reap significant rewards, especially in their areas of cost savings and customer retention.

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