Hi Tony,
I guess it baffles me what Needham thinks of their client mentality and how they must have delivered this research note.
Uh, if you have Compaq, hold.
--
Banking On Appliances
(01/04/01, 6:12 p.m. ET) By Steven Marlin,
A wave of new consumer electronic devices -- the
vanguard of revolutionary changes wrought by broadband
and mobile e-commerce -- is hitting banks and other
commercial enterprises.
Ranging from low-cost Internet appliances to wireless
handheld devices to more far-out products like wearable
computers, the gadgets are challenging the desktop PC's
place at the head of the information delivery table,
producing fundamental changes in the way people interact
with their environment and each other.
Internet appliances -- streamlined PCs intended for home
use, without the software and hardware burdens
associated with full-blown PCs -- are being touted as a
way to wire young people, seniors, and other
"disenfranchised" members of the population.
For people who don't own PCs, Internet appliances offer
all the benefits of Web TV and none of the drawbacks,
according to proponents. Screen resolution is crystal
clear, and there's no quarreling with family members who
want to use the living-room TV for watching football rather
than making bill payments.
According to IDC, Framingham, Mass., the information
appliance market will grow, from 11 million units in 1999
to 89 million units in 2004.
To further Internet appliance appeal, the devices are being
offered dirt cheap. Compaq Computer Corp. (stock: CPQ)
is peddling its iPaq line of Internet appliances for $199 or
less in a tie-in deal with Microsoft Network. Netpliance
Inc. (stock: NPLI) is pitching its iOpener line at seniors
and others who have never owned a PC. And ISP NadaPC
Inc. is giving away iCEBOX -- a Samsung-built
combination Internet appliance and home entertainment
system, complete with TV, audio CD, and DVD player --
free to customers who sign up for three years of its
service and an online checking account with Compubank.
In an updated version of the toaster giveaways of the
1970s, Qubit Technology is talking to banks about giving
away its new tablet-size, wireless Web devices at low or
no cost to high-value customers.
"It's a brand extension and top-of-mind presence," said
Donna Crafton, a spokeswoman for Qubit, Golden, Colo.
"It obviously is great for them for customer acquisition and
retention."
Gateway, the nation's biggest seller of consumer PCs, is
set to launch a line of Internet appliances in conjunction
with America Online Inc. (stock: AOL). Consumers are
looking for new ways to incorporate the Internet into their
lives, said Brad Williams, a spokesman for Gateway Inc.
(stock: GTW), adding that broadband and "networkability"
are paramount.
"If you've got an Internet appliance that doesn't talk to the
PC and other devices in your home, that's only half a
solution," Williams said.
ViewSonic Corp. is offering a line of appliances in
conjunction with AT&T's WorldNet service, ranging from
standalone i-boxes to Web phones and wireless Web
tablets. Featuring both dial-up and broadband Internet
access, the appliances are being sold initially into the
corporate market, but some lower-priced models will be
aimed at consumers.
"You could have a [wireless] tablet that sits in a cradle;
then you can go over to the couch and watch TV and
check your stocks at the same time," said Gene
Ornstead, business manager at ViewSonic, Walnut, Calif.
Yet questions abound about the degree to which
consumers will embrace devices other than PCs for online
banking.
"I am relatively skeptical about this kind of proposition --
it's Internet for people who seem to be intimidated by
PCs," said Richard Bell, an analyst at TowerGroup,
adding that appliances don't offer the same degrees of
convenience, control, and reliability as regular PCs.
"Appliances are going to be the wave of the future; I'm not
sure they're the wave of today," said Bob Rickert,
executive vice president and chief information officer at
KeyCorp, Cleveland, which has a wireless pilot under way
with 724 Solutions Inc. (stock: SVNX), a Toronto ASP.
"I'm not sure that customers are going to be interested in
spending that kind of money for a wireless Internet play. If
it does more than that, I think you're in the game."
For banks, appliances would add to the already formidable
problem of tying together information in various silos and
moving it seamlessly across any of the retail channels.
"It's all about real-time channel management -- whether
that's a physical branch, wireless, or one of these Internet
devices," said Bill Randle, executive vice president at
Huntington National Bank, Columbus, Ohio, and founder
of e-Bank, a Huntington venture that offers technology for
banks to synchronize their branch, ATM, telephone, and
Web channels.
It costs a bank $40 million to $50 million on average to
create the technology itself, Randle said.
Indeed, if history is any guide, Internet appliances face a
tough hurdle in financial services. The track record for
delivering financial information electronically via devices
other than ATMs and PCs -- including data phones and,
more recently, interactive TV -- is dismal.
In March 1998, Bank of America, Intuit,
Tele-Communications Inc. (TCI), and @Home Network
formed a venture to deliver financial services via digital
set-top devices to cable customers of TCI.
"Cable television delivery promises to revolutionize the
way consumers access their financial services," said
David Coulter, chairman of Bank of America at the time.
Two weeks later, Bank of America merged with
NationsBank. TCI and @Home (now Excite@Home) were
both subsequently acquired by AT&T. The venture folded.
Hopes for delivering banking services via interactive TV got
a similar boost in 1997 when Microsoft acquired Web TV,
but trials to date have been disappointing.
"When Web TV came out, I congratulated [Web TV
founder] Steve Perlman on how good the display was,"
said Dr. Andrew Lippman, associate director of the MIT
Media Lab. "Its main benefit was e-mail for everybody. It
didn't catch on."
Republic Bank, a St. Petersburg, Fla., community bank,
has been offering home banking via Web TV for three and
a half years. One of the first banks in the state to offer
online banking, Republic saw Web TV as a way to reach
the population centers of the Gulf Coast and central
Florida. However, only 1 percent of its customers are
using the service.
"When we first came out with Internet banking, I thought
[Web TV] would take off with the consumer. It hasn't,"
said Dave Beach, vice president and e-banking manager
at Republic "The bottom line is consumers didn't find Web
TV to be the way they want to surf the Web."
Beach said the bank has been successful with its overall
online banking program, which it offers through S1, with a
17 percent customer penetration rate.
Even in the 50 percent of U.S. households that aren't
online, the appeal of using the TV to access the Web is
mitigated by low screen resolution and quarrels over the
use of the TV set.
"My argument against Web TV is the big TV is for
entertainment vs. logging on with a PC or one of these
inexpensive devices," Randle said.
But Internet appliances are just part of the story.
Broadband -- the delivery of digital content to homes at
high speeds via cable modems and DSL -- promises to
accelerate the convergence of digital media at a geometric
rate.
DSL, which provides high-speed Internet access over
regular phone lines for $40 a month, is projected to grow,
from 330,000 subscribers at the end of 1999 to 9 million in
2003, according to eMarketer. Cable modems -- offered
through services such as Excite@Home and
Time-Warner's Road Runner, and also priced at $40 a
month -- are projected to be used in 10 million homes by
2004, up from 1.85 million at the end of 1999, according to
The Yankee Group.
Another broadband service is Geocast, which aggregates
digital content from cable and network TV broadcasters
and delivers it via a personal server, a small box attached
to a desktop PC.
For content providers, broadband is comparable to the
meteor that supposedly hit the earth 65 million years ago
and wiped out the dinosaurs, said Nobuyuki Idei,
chairman and CEO of Sony Corp. (stock: SNE), in a
published interview.
"The Internet is like that meteor for the music industry,"
Idei said. "The broadband Internet is a second meteor, for
the global motion-picture industry."
The analogy is equally valid for financial services.
"I would add that the third meteor is m-commerce,"
Huntington's Randle said. "M-commerce will place a
threat on virtually everyone in commerce, certainly the
financial services industry."
Noting that the chip in Sony's new PlayStation 2 video
game is to a Pentium III what a "racing car is to a sedan,"
Randle said a broadband network capable of utilizing such
devices is still in its infancy. Apart from cities like
Columbus, Ohio -- a regional high-tech center where Time
Warner Inc. (stock: TWX) has been offering Road Runner
for a year and a half -- the United States lacks adequate
broadband capacity.
"People are just getting PCs and devices [and content]
that can take advantage of broadband delivery," Randle
said.
Still, the m-commerce boom is already under way in
financial services and will soon envelop banks. Citing
Charles Schwab & Co.'s PocketBroker service, through
which customers may access brokerage services via
Palm handheld devices, Randle said, "What's the
difference between that and a PocketBanker?"
Aiding the m-commerce revolution are third-generation, or
3G, mobile devices: cell phones and PDAs that are being
developed for UMTS, the successor to GSM, which is the
current standard for mobile telecommunications. Equipped
with miniature disk drives, chip card readers, and
high-speed data access, 3G devices will support video
streaming, enabling users to exchange video e-mail as
well as download news, sports, and other Web content.
Behind them lie even more exotic devices. Some, like
camera-equipped headset devices -- one of which
appeared in a commercial aired by IBM Corp. (stock: IBM)
during the World Series -- are intended for specific uses in
medicine or industry. Others are designed to be
embedded unobtrusively in objects worn or carried on the
body -- wristwatches, keys, wallets, and shoes -- as well
as in home appliances, walls, doors, cars, etc.
By communicating with each other through Bluetooth -- an
emerging standard for short-range radio frequency
transmissions -- or some other protocol, such devices
would form a personal area network (PAN). A PAN
enables individuals to regulate the climate in their homes,
buy gas, or gain access to a secure facility without using
or interacting with a keyboard or card reader -- in effect
reducing the man-machine interface to a voice command,
a change in body temperature or pulse, or the touch of a
fingertip.
To those who study the impact of technology on society,
PANs serve to create symmetry between and among
individuals and organizations, as the PC did 20 years ago
and the Internet is doing today. For example, the
relationship today between a bank and its customers is
asymmetric, MIT Media Lab's Lippman said.
"There's a bank and you're a customer; the key thing is
whether everything you carry on your person is going to
become a branch bank and effectively part of the full range
of whatever the banking system becomes," he said
To some observers, PANs raise serious privacy issues
and brings up darker questions about the possibility of
machines turning malevolently against their masters. But
Lippman offers a different scenario, based not on the
imaginings of sci-fi writers, but on demographics. The
generation now entering school is the first that's never
known a world without the Web, he said
"They're used to dealing in a different communicative and
technological environment from the one we grew up with,"
Lippman said.
The banking industry has already awoken to this,
introducing products like Visa's Buxx, a stored-value card
aimed at teenagers that does not offer credit but enables
them to pay by drawing on deposits.
"Suddenly kids are using plastic," Lippman said. "That's a
fantastic bellwether for what kind of changes you can
expect in the banking world. For if those kids start to
adopt this kind of thing, then your predictions about the
future of Palms and Internet appliances as it relates to
banking are completely different." |
