Mobile Trading: The M-Commerce Revolution

The financial industry has seen tremendous growth in the number of stock market participants -- not only daytraders, but also individuals who participate on a weekly or even irregular basis. Yet wireless trading hasn't attracted much attention from consumers. That hasn't stopped brokerages from offering this service to their customers, though. After all, it is convenient for people on the go. All you need is a wireless device, a service, and a modem (if necessary) and you are ready to trade, whether you are at a restaurant, in an airport, or even at the beach. You can finally leave home and still be in touch without lugging along a laptop.

THE COMPETITIVE MARKET

Fidelity was the first on the wireless scene with its Instant Broker service. Since the company offered this service in October 1998, the number of wireless account holders had grown to more than 56,000 by May 2000. Although wireless trading hasn't caught on among customers as rapidly as the use of wireless devices in general, other companies such as Charles Schwab, Inc., DLJ Direct, E*Trade, TD Waterhouse Investor Services, Ameritrade, and Discover have followed suit. They are betting on wireless trading to take off in leaps and bounds. If it does, they certainly don't want to be left at the gate.

What makes wireless transactions possible is the technology that provides mobility of information. Maryland-based Aether Systems, Inc., is one of the leading companies that provide the applications for wireless stock trading and financial data delivery. Its strong financial services client base includes Charles Schwab, Inc., and MSDW Online (Morgan Stanley Dean Witter). When asked where he thinks the wireless trading industry is going, John Shepley, corporate vice president of financial services at Aether, says: "Although the uptake of wireless trading hasn't been as profound as some analysts expected, we still see a steady, if not earth-shattering, continuance of use. We have seen usage of wireless trading increasing over time and it will continue to grow."

In spite of the convenience they offer, wireless devices such as personal digital assistants (PDAs) and web-enabled cellphones have restrictions, such as small screens and awkward keyboards. These limitations can make complex tasks such as researching a stock or viewing charts difficult, but wireless devices are ideal for quick tasks. Many brokerage customers use wireless devices to look up stock quotes, check stock portfolios, and receive e-mail alerts on selected stocks.

Mini-PCs such as the Palm or Handspring Visor or those that run on Microsoft's CE operating system have larger screens and slightly better graphics than web-enabled cellphones, but they are not anywhere close to what's available on a PC or laptop. (For more information on popular handheld devices, see "Band Of The Handheld PCs" at Working-Money.com.) When it comes to logging onto your online brokerage account and placing a trade, that small screen and limited keyboard can be a frustrating experience. You could also run into problems with coverage. If you are in the middle of a transaction and your service is interrupted, it could affect the transaction.

Services also vary from broker to broker. You will find some that offer wireless trading exclusively on one type of phone, whereas others are more flexible. In addition, you will have to find a broker that provides service in the areas where you spend most of your time. Additional costs are associated with the service, which vary from broker to broker.

TEST RUN

To sample the wonders of wireless trading, I tried my hand at it through an AT&T PocketNet phone. This particular service provided access to TD Waterhouse, Schwab, E*Trade, CSFB Direct, and Ameritrade. If you have an account with any of these brokerages, trading is relatively simple. All you need to do is enter your account number and password and you're ready to go. To place trades, just key in the amounts and push a few buttons. The speed at which the information downloads onto the small screen may be only slightly slower than a PC. However, a problem arises if you don't have an account with the listed brokers. In this case, here's a warning: Entering the URL of your broker's website will require tremendous patience.

WIRELESS AND THE WEB

Wireless trading is proliferating, but it still has a long way to go before it embraces a larger customer base. However, analysts still expect wireless trading to take a big leap forward. Why? Because financial information is time-critical. That's the basis behind the belief that wireless online trading provides a huge opportunity and should continue to build momentum. "With some of the newer hardware such as web-enabled phones and capabilities such as unified interfaces and portal capabilities, wireless trading will become easier and we will see trading combined with other features such as banking and e-mail," says Shepley. And with the rapid advancements in mobile technology, we can expect that time to come soon.

Editor Jayanthi Gopalakrishnan can be reached at Jayanthi@Traders.com.

SUGGESTED READING

Penn, David [2000]. "Band Of The Handheld PCs," What's New, Working Money, Volume 1: November/December.
_____ [2001]. "The Web World In Your Hands," What's New, Working Money, Volume 2: March.

Current and past articles from Working Money, The Investors' Magazine, can be found at Working-Money.com.

Copyright © 2001 Technical Analysis, Inc. All rights reserved.