Wireless Brokerage: Gains and Pains

The wireless channel is spreading throughout retail brokerage and trading as wireless vendors emerge with applications. However, fragmentation in standards, incompatible networks and small screen displays are causing the U.S. to lag Europe and Asia.Judging from the way that mobile e-commerce vendors and financial institutions are jostling for position, it looks as if wireless delivery of financial information and trading-based upon the wireless application protocol, or WAP-is the next hot thing in financial technology. WAP is a content, software and networking standard for mobile Internet browsing which can be used with WAP-enabled cell phones, personal digital assistants (PDAs) and pagers. Starting with Fidelity in 1998, leading financial service companies such as Dreyfus Brokerage Services, TD Waterhouse, Charles Schwab and Chase are among the early adopters of WAP-based applications, though smaller Internet broker/dealers were the first to roll out wireless as a way to differentiate themselves.Suppliers range from WAP developers like w-Trade and Macalla Software to systems integrators and wireless application service providers (WASPs) such as Tantau, Smartserv and Aether Systems. According to a report by Meridien Research, released July 17, titled, "Wireless E-Financial Services & WAP Phones: Force-Fed or Fabulous?" there are at least 50 WAP brokerage and banking services in operation or in test phase worldwide and the majority of the WAP work done for financial institutions has been proprietary or highly customized.Hardly a day seems to pass without the announcement of another strategic alliance or product launch that has appeal to both retail investors and institutional participants in financial markets. In June, Quick & Reilly said it was offering wireless securities trading in partnership with w-Trade Technologies on virtually every major wireless device and network including Palm organizers, two-way pagers such as the Research in Motion pager, and personal communicators such as Nokia 9000il Communicator and cellular phones made by Motorola, Ericsson and Neopoint. On the trading front, both individual and professional traders can already receive real-time news and data, trading alerts and view research as well as place orders using WAP-enabled devices. Elsewhere, a number of financial institutions are starting to look at opening up their internal back office systems to WAP so senior staff on the move can still keep tabs on the settlement process, and intervene in case snafus arise. However, despite these early adopters, various studies say the U.S. lags in comparison to Europe. Also, as TowerGroup notes, there is a higher installed base of wired PCs and Internet communications charges are much cheaper than overseas. "In some regions, such as Scandinavia or Japan, mobile financial services are already near the top of the rankings in terms of customer demand," says Octavio Marenzi, managing director at Celent Communications. "European and Asian financial institutions will lead this trend over the next two years, as deploying a wireless access channel is an absolute necessity for them in these markets." MeritaNordbanken in Scandinavia (a region with extremely high mobile phone usage) has already stolen a march on the rest of the global financial community. Besides offering WAP-based price quotes and portfolio management, the bank was the first in the world to offer its clients WAP equity trading for domestic securities commencing in late January of this year and some 40,000 clients are authorized users. At present, the U.S. is in third place, as the existence of multiple wireless networks with incompatible standards and a low adoption rate of service-enabled mobile devices rather slows things up, though some U.S. financial companies are going full steam ahead. Broker TD Waterhouse has recently announced an alliance with Bridge, which will allow investors global mobile access to financial data, news and analytics via BridgeConnect, Bridge's mobile financial information service.Markets offered will include global indices, equities, forex rates and commodities. Functionality will include earnings charts, search capabilities and portfolio management. In the U.K., financial portals such as Interactive Investor and MoneyWorld already offer free delayed quotes and portfolio management tools for WAP devices via dedicated subportals. Though retail financial services have been the first area to take advantage of WAP technology, in the professional marketplace, Datalink.net has recently signed up Chase Global Markets as its first customer for Global Market Pro. The wireless application provides real-time financial data from major sources, including Reuters, Market News International and GovPX for traders and other professionals in the global capital, derivative and foreign exchange markets. Global Market Pro was developed in cooperation with Chase's Global Markets Data Division and offers support for a range of devices including WAP phones, Research in Motion's 950 Wireless handheld, two-way pagers, and the Palm VII. Innovision of Garden City, NY, has also recently announced that institutional securities firm Dain Rauscher Wessels will be piloting the version of Innovision's Financial Webtop ported for Research in Motion's handheld devices. The complete Innovision financial suite, which also includes Innovision's Financial Server, uses open financial XML protocols, such as FIXML, to combine financial data from a variety of sources. According to Rich Blasing, vice president of information services for Dain Rauscher, the use of such common standards is a major bonus. "Anywhere, anytime access to real-time market data using standardized XML protocols will provide us with a competitive edge on the trading-room floor," he says. The wireless initiative will allow the firm's staff to send and receive real-time indications of interest (IOIs), orders, confirmations and execution reports while on the move.

Infrastructure Problems Some see the way in which underlying securities markets are developing as likely to foster the increased financial adoption of WAP. "For example, look at the way in which equity markets have become increasingly globalized through exchange alliances," says Murali Subbarao, director of global strategy and alliances for financial services at Hewlett-Packard, which has relationships with both Tantau and SmartServ. "You are no longer restricted to time zones, so if you aren't in the office you might still want to trade out of hours-a factor which is likely to increase WAP's market penetration." In June, HP said it was building a global wireless financial services platform with SmartServ, which it also invested $20 million. The service will include securities trading and trade-order routing from any Web or wireless device straight through to all of the major stock exchanges worldwide. HP's collaboration with Tantau led to a deal with the New Zealand Stock Exchange, which will allow users with WAP devices to trade and transfer securities directly, without passing through a broker. In both cases, the core application is Tantau's Wireless Internet Platform, which will allow the secure transfer of data between the wireless device and the back-end infrastructure provided by HP. Despite the recent flurry of activity, some commentators see certain inherent structural problems in the wireless market as hindering development.One of the most obvious problems is the non-graphical nature of WML (wireless markup language). Text is created in WML, a reduced version of HTML and then read on the WAP-device screen and scrolled through using the device's built-in microbrowser, explains Meridien's report. This makes integrating an enterprise-wide system that already includes more complex objects (that can't easily be represented as text) with the wireless interface problematic to say the least. "You have to do a lot of work to make the integration and translation work-we know that this is proving troublesome for a lot of investment banks," says Steve Ross-Talbot, founder and CTO of London-based software development company SpiritSoft.Others see personalization as an alternative to trying to squeeze a full application down the wireless pipe. "The best initiatives involve taking advantage of the fact that you have a real-time secure personalized communication channel and sending only the most germane information," says Niall O'Cleirigh, CEO of Macalla Software a provider of XML/WML and WAP-enabled products and e-Commerce solutions for the global financial services sector. "For example, for a broker handling a lot of volatile new issues, where market response is obviously critical, the system could be set up so that a message would be sent if preset thresholds were breached. However, the important component would be ensuring that any response the user made was automatically understood by the system to relate to that particular alert message. This information could then be used to practical speed advantage by ensuring that upon responding the user could be automatically presented with a quote for the correct security and ability to actually make the trade with only a one-button click." Dresdner Kleinwort Benson, one of the most prominent adopters of WAP amongst investment banks, takes a similar line. "Our big focus is on minimizing the clicks-rather than fretting about issues such as screen size, which may improve anyway," says Al-Noor Ramjii, DKB's global head of IT. "If we keep the number of clicks down, it reduces the likelihood of client frustration, transaction abandonment and lost business. As standard on a typical WAP phone today you have five clicks before you can access what you want and five periods of waiting for transmission-that's too much." Another problematic area with the current version of WML (1.1) is that as a standard, it is pull as opposed to push based. This makes data delivery slower as wireless client devices have to poll the server in order to receive data updates. It also runs the risk of generating bottlenecks at the server caused by a sudden rush of requests from client devices. Version 1.2 of the WML standard will change the nature of WAP to become push based. Another issue is the small screen sizes. "I think the other obvious factor in the relatively slack take up of WAP in financial markets is that the people who've been pushing the market are the phone manufacturers and they've missed the plot," says Ross-Talbot. "Nobody is going to do serious business such as B2B capital markets transactions on a WAP phone as the screen is too small-they'll use pagers in preference as the screen is bigger." Ross-Talbot sees phone manufacturers coming under threat from the makers of PDAs, such as Compaq's new iPAQ Pocket PC, that are already close to having voice call capabilities on their devices. Though most financial institutions have reservations about the resilience of the Internet, this issue hasn't seen much discussion as yet in a WAP/wireless context. "Wireless networks need to be good enough to foster adoption-that's a long-term infrastructure challenge," says Stephen Peck, of HP's e-financial business unit. "You need 100% availability everywhere in your region-and ultimately globally-with service-level guarantees from wireless device to infrastructure back end." HP has already done this with hits Web QOS project, which in collaboration with other vendors such as Cisco gives bandwidth priority to users making transactions as opposed to merely browsing. It is now also looking to bring this to the wireless market with a similar project entitled WAP QOS. In common with any transactional medium, another important issue with WAP in financial markets is security. One company active in this field is Securant, which has recently enhanced its existing ClearTrust secure Control product to secure, manage and provide personalized user access to Wireless Application Protocol (WAP)-based resources. Securant's solution is rule based and can incorporate any available information relating to the mobile device. At its simplest this could be a WAP phone's SIM (subscriber identification module) card ID or phone number. "At a more sophisticated level, the rules could take account of the device's geographical location by automatically accessing the wireless network company's call log database," says Hai Ngo, Securant's vice president global Internet security solutions. "Then access to the functionality could be automatically barred if the device was being used from the wrong location." What's Next? Looking ahead, the WAP omens are promising. Recent research by Celent Communications suggests that by 2004, WAP financial services will be very much the norm, with 85% of the top 100 financial institutions in Europe expected to be delivering products over WAP by then. TowerGroup reports there are approximately 43,000 wireless brokerage traders in the U.S. and it estimates that a further 104,000 investors currently use the wireless channel to access market information and content. In a recent report, the research firm expects these numbers to rise to a total of 4.2 million wireless traders and content users in 2005. It predicts this "hundred-fold increase in users will occur as device and network technologies improve, data capable devices approach ubiquity and user-friendly brokerage content becomes commonplace in the wireless channel." Progress in the U.S. market could be exponential, but will be dependent on collaboration between telcos to provide the widest possible geographical coverage to users. It looks very likely that the quality of the WAP experience will continue to improve, especially if PDA manufacturers with their larger screens continue to encroach on the phone manufacturers' market. Security may also become less of an issue as biometric authentication technology, such as iris scanning and fingerprinting, continues to drop in price. That in turn should help financial institutions feel more comfortable with the concept of opening up their enterprise systems in back and middle offices, so mobile staff can keep tabs via WAP devices on areas such as clearing and risk management.