Schwab Needs to Catch Up In Mobile Apps

The following analysis of Schwab's mobile services is based on research originally prepared by Glenn Hall, Sarah Kennedy and Vivian Wekesa for Prof. Barry Unger's online graduate course "The Innovation Process: Developing New Products & Services" as part of the Master's program at Boston University.

SAN FRANCISCO (TheStreet) -- Charles Schwab (SCHW) needs to more aggressively adapt to the growing use of mobile technology that is rapidly changing banking and investing in a way similar to the disruption previously caused by the Internet.

Mobile banking is moving into the mainstream and financial institutions will soon face a competitive environment in which the majority of rivals offer mobile services, with success based largely on the company's technology strategy, according to Matthew Talbot, vice president of m-Commerce at Sybase 365, a division of SAP (SAP).

Apple (AAPL) set the tone with the iPhone, which demonstrated that small touch screens can handle more sophisticated content and services once thought possible only on desktop and laptop computers. Bank of America (BAC), which owns Schwab rival Merrill Lynch, was among the first banks to release an iPhone application in January 2008.

While Schwab has said it plans to have an iPad app ready by the end of 2010, competitors such as E*Trade(ETFC) and TD Ameritrade (AMTD) were ready to go when Apple debuted the iPad. Fidelity and Scottrade have also been pushing aggressively into mobile banking and investing, along with a host of startups that have entered the mobile financial category with apps for the iPhone, Research in Motion's (RIMM) Blackberry and Google (GOOG) phones.

In the U.S., 10% of banks offered mobile banking in 2008 and 57% planned to add those services within two years, while globally 34% of banks offered mobile services in 2008 and 32% planned to add those services within two years, according to Talbot's research. A study by Sybase also found that 25% of bank customers would switch to a new bank based on the availability of mobile services.

Schwab is behind the curve. While CEO Walt Bettinger said in July that the company is making "significant investments" in new mobile applications for banking and brokerage, the company needs to engage more aggressively in creating specialized mobile applications or risk being overtaken by others who embrace the disruptive potential of the wireless revolution already underway.

The company currently offers a mobile version of its Web site with access to real-time market data, banking accounts and trading services. It lacks customized applications for the new breed of smart phones using the "app" functionality offered by Apple, Research in Motion and Google's Android system. These apps are able to provide services that are optimized for the mobile user and are rapidly becoming a consumer standard.

Sarah Bulgatz, Schwab's director of corporate public relations, confirmed that the company is "currently working on mobile apps" for iPhone, iPad, Blackberry and Android. The company continues "to see strong usage on the wireless web" she said, adding that Schwab is not ready to share more details about its mobile plans at this point.