Despite the hype surrounding mobile stock trading in the U.S., the economic and longer-term values of investments in this technology are open to serious question, according to Gartner, Inc. Gartner said that CIOs, strategic planners and business-unit leaders thinking of developing mobile stock trading capabilities for their retail customers should consider if the online channel is a better place to invest in improved self-service for their brokerage clients.
“Although all five of the largest U.S. discount brokers offer mobile trading, actual consumer adoption is pretty low with less than 2 percent of U.S. consumers and 5 percent of discount brokerage clients taking it up to date,” said David Schehr, research director at Gartner. “However, more than three-quarters of discount brokerage traders use the online channel. The issue is not just whether these activities can be done via the mobile channel, but whether enough readers and trades will shift to the mobile channel to justify the investment.”
Mr. Schehr explained that the fit between active traders’ needs and the value of mobile trading is limited as the hardware form factor of smartphones makes technical analysis difficult, and other alternatives for rule-based trading diffuse much of the need for mobile access. Instead, he said that most on-the-go trading is more likely to take place in semi-mobile situations in which notebook and netbook computers, combined with increased connectivity, will remain the predominant tools used for stock trading by retail investors.
“As with many new consumer-focused technologies, mobile trading has a bit of the ‘gee-whiz geek’ factor,” said Mr. Schehr. “The presumption is that some consumers will take to the new technology simply because it is a new technology. However, this does not mean that there will be any rapid expansion of adoption beyond these innovators and early adopters.”
Gartner believes that if it is to be profitable, mobile trading will require a high volume of absolute, as well as incremental trading activity — a user who trades via mobile once or twice a month is unlikely to generate revenue sufficient to cover the costs of developing the technology infrastructure to support the channel. Based on historical data and discussion with industry participants, Gartner estimates that even a broad definition of this group would include no more than 500,000 U.S. investors, and is more likely in the range of 200,00 to 250,000, including occasional traders.
Consequently the value of mobile trading is likely to be limited to a small group of active investors who have an interest in maintaining the real-time capability to trade and accept the limitations of a mobile device in return for persistent access and portability. Based on all these factors, the size, and thus the revenue value of this group is likely to be small for the near future.
As a result, Gartner advises those thinking of developing mobile trading capabilities to carefully analyze how much of their client base consists of active traders, and conservatively estimate the incremental revenue that mobile trading will deliver from them. This should then be compared with the cost of implementing mobile trading in multiple device platforms.
“Unless there is a strong business case for mobile trading, invest in two other areas — better computer-based online functionality for your more active traders and enhanced research and planning tools for your less active long-term investor segment,” Mr. Schehr said. “If you do decide to proceed with developing mobile capabilities, ensure that they are not stand-alone, but support and link to other self-service channels.”
Additional information is available in the Gartner report “Mobile Stock Trading in the U.S.: Separating Hype from Reality.” The report is available on Gartner’s website at http://www.gartner.com/resId=1246813.
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