Swedish mobile phone maker L.M. Ericsson Telephone Co. and computer giant IBM Corp. (IBM) think the big financial institutions, such as Fidelity Investments Inc. and Charles Schwab & Co. (SCH) , want to make sure they don't dismiss wireless trading the way they rue their decision not to plunge into online trading.
The two companies announced Thursday that they would combine resources to develop interoperable software that allows financial institutions to offer complex services - everything from trading securities to calculating a customer's total net worth - on mobile phones.
The technology leaders will likely find plenty of customers for their new products. Banks and brokerages, which saw companies such as E-Trade Group Inc. and Ameritrade Inc. steal business as they dawdled getting online, have already spent millions of dollars creating wireless application protocol sites needed to connect their customers with financial information. Spending on wireless financial services systems is expected to grow to US$1.9 billion in 2005, from $230 million last year.
Financial terms of the IBM-Ericsson pact, which is a nonexclusive partnership, were not disclosed. The companies, however, are planning to devote at least 100 people from each of their staffs to this project.
Currently, IBM derives 25 percent of its total revenue from selling software, hardware and services to financial customers. Both IBM and Ericsson have worked with Schwab, Visa International Inc. and Citigroup Inc. (C) , and are likely to sign up common clients to test a suite of more advanced services. Germany's Deutsche Bank AG (DTBKY) , one of the largest global banks, has already signed up.
"While they're anxious to get in this space, financial organizations don't feel confident enough to open the services to lots of people and lots of transactions," said Mark Greene, VP of strategy and solutions for IBM's Global Financial Services Sector. "So we're saying that you don't have to worry about the stability of the vendor or the fragility of the technology any more. There are big companies involved now."
Whether customers will flock to these services is another question and security continues to be a major issue in the wireless world. By going after financial institutions - which would be potentially liable for any breaches of their networks - IBM and Ericsson are beginning to tackle a big hurdle to wireless commerce.
Greene said that it's likely to see their partnership with Ericsson expand to other market sectors, potentially transportation and logistics.