Schwab Needs to Catch Up In Mobile Apps

Charles Schwab is behind the curve on the mobile "app" wave that is rapidly changing the banking and investing world.
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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) - Get Report

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) - Get Report

.

Apple

(AAPL) - Get Report

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) - Get Report

, 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) - Get Report

and

TD Ameritrade

(AMTD) - Get Report

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) - Get Report

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.

Demand for Mobile Banking

Evidence supporting an opportunity for mobile financial services is abundant.

Juniper Research

is forecasting that by the end of 2011, the number of subscribers who conduct transactions on mobile devices will triple to more than 150 million worldwide. Mobile banking has been embraced by all generations, especially those who regularly use smart phones such as the Blackberry and iPhone. No matter their age or household income, smart phone users are more likely to adopt mobile banking, according to a recent report by Linda McGlasson, managing editor of

Bank Info Security

.

More people around the world have access to the Internet through a mobile device than through a computer, with an estimated 1.3 billion people connecting online through their phones, according to research by Det Ansinn published in LIMRA's MarketFacts Quarterly. Internet phone sales reached 850 million devices in 2009, and smart phone sales are expected to grow 95% between 2008-2015 as mobile usage shifts to data from text and voice, according to Ansinn.

One of the most appealing aspects of mobile banking is access to real-time information, which when combined with other account services can create an experience that customers will use regularly and be willing to purchase, according to a report by Nicholas Pratt published in

The Banker.

Schwab should include a text message platform that provides automated alerts for both banking, such as low account balances, and trading, such as when stocks hit preset levels. These services are already offered by rivals such as Bank of America and by independent services such as

AT&T's

(T) - Get Report

mobile banking application, which supports Schwab accounts.

To capitalize on the value-added service offered through branch offices and Schwab's financial advisor network, the company should utilize mobile phone GPS technology to enhance its branch and advisor locator tools. Instant mobile chats and click to talk functionality would also enhance the customer service experience. A "Talk to Chuck" mobile application would be a logical extension of the current "Talk to Chuck" advertising campaign in which Schwab is positioning itself as a company that understands and responds to the individual needs of its customers.

SchwabLink

The successful SchwabLink service, established in 1991 to provide back-office custodial services for independent fee-based financial advisors, also needs to go mobile. Schwab should make all of the transaction, record-keeping and statement preparation services of the original SchwabLink available through a mobile interface.

More than a third of the 201 financial advisors who participated in the 2008 survey by the Aite Group stated that they spend at least 25% of their work time outside the office and only 14% stated that they conduct all of their business in the office. While 53% of advisors in the Aite survey carry advanced mobile devices such as smart phones, only 22% said they used their phones for advanced business tasks beyond email, contact management and scheduling - yet 62% said they would find it useful to access other mobile business applications.

This presents a clear opportunity for Schwab to help members of its financial advisors network to use mobile technology to more efficiently run their businesses and serve their clients. By leveraging its technology investments just as it did with the original SchwabLink, the company could provide a mobile tool for advisors that they would not likely be able to afford on their own, creating additional incentives for advisors to partner with Schwab. Current market conditions have increased the volume of client inquiries, and the ability to respond quickly and efficiently, whether at the office or not, is a competitive advantage that mobile technology can provide, according to recent research by

Oracle

(ORCL) - Get Report

.

Whether serving consumers with its own mobile apps or supporting its network of independent financial advisors, Schwab needs a more comprehensive mobile solution to be a player in today's wireless world. The mobile phone offers the opportunity to engage customers with increased interactivity and respond to growing demand for convenience and round-the-clock access, where ever they may be, on whatever device they may use.

For this research project, Boston University graduate students were tasked with making recommendations for Schwab based on the following criteria: "Charles Schwab has succeeded by evolving continuously in its products and services to take advantage of changes in its environment and the basis of competition, such as the deregulation of brokerage fees in 1975, the changing investment needs of baby boomers in the 1990's, and the advent of the internet this past decade. Using the tools of innovation, such as introducing disruptive technologies first in specialized niches that most need them, and making whole products that address customer lifestyle changes, what strategies would you recommend for Charles Schwab to address the next 10 years?"

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For this research project, Boston University graduate students were tasked with making recommendations for Schwab based on the following criteria: "Charles Schwab has succeeded by evolving continuously in its products and services to take advantage of changes in its environment and the basis of competition, such as the deregulation of brokerage fees in 1975, the changing investment needs of baby boomers in the 1990's, and the advent of the internet this past decade. Using the tools of innovation, such as introducing disruptive technologies first in specialized niches that most need them, and making whole products that address customer lifestyle changes, what strategies would you recommend for Charles Schwab to address the next 10 years?"