Of Hong Kong's 6.8 million residents, just over half use mobile phones. As the choice of WAP-enabled phones increases and the technology becomes more sophisticated, Schwab expects 90% of its Hong Kong customers to trade over their phones. Already, more than 90% of Schwab's customers trade online via computer, compared to 80% in the US, says Christina Hui, regional general manager for Charles Schwab in Hong Kong.
"This isn't necessarily about getting new customers, but about providing more services,' Hui says. Initially, Schwab customers who want to trade over their mobile phones in Hong Kong will have to sign up with SmarTone. Schwab will provide security between customers and the telephone company by using Ericsson's Mobile e-Pay security system, which incorporates public key cryptography, or PKC. Eventually, Schwab and Ericsson hope to provide secure trading with numerous telephone operators.
Schwab says that while Hong Kong will be its first market, it plans to add the US later. The company says it has spent 16% of its total revenue, or $300 million, a year on technology for the past five years. It expects to recoup its investment by reducing costs, including manpower.
The company is betting its integrated security system will be more popular in the long run than SIM toolkits, which allow customers to trade using a special card. Schwab says there are several problems with the SIM card: its memory is limited, so to add more securities it needs more programs. Every time a new program is added, cards must be returned and new ones issued.
Schwab says it isn't worried about competition from other online brokers such as E-Trade of the US. It says it plans to maintain a full range of services, as well as a bricks and mortar branch office presence, that it believes will help it maintain its brand and market share.