News : June 13, 2000

Royal Bank in wireless security venture joins with Baldhead:
New firm promises to make transactions more leakproof

Vito Pilieci
June 13, 2000
Financial Post

Royal Bank of Canada announced yesterday it is forming a company with Baldhead Systems to provide secure wireless banking and brokerage services.

Toronto-based Baldhead specializes in application development. Royal Bank will have 20% of newly formed Sona Innovations while Baldhead retains 80%. Financial details of the agreement were not disclosed.

"This gives us the opportunity to put a product out where we have end-to-end security between the palm unit and our back-end systems," said Jim Connor, manager of electronic services technologies for Royal Bank.

Sona will give financial institutions the ability to design and implement encryption technology to protect clients carrying out wireless transactions.

"Encryption is very important to the bank, it's really one of the cornerstones of everything we do," said Mr. Connor.

Existing security flaws in wireless communication lie in the use of gateway servers that translate incoming data from wireless devices before that data is accepted by the target company's computers. "The problem is these translator boxes potentially expose a security problem," Mr. Connor said. Sona will obviate the need for gatewary servers, Baldhead said. Bill Halpenny, vice-president of sales and marketing for Baldhead, said their system is "the highest form of encryption that you can have for any wireless device, and because it is encrypted end to end, there are no holes in the system."

Baldhead said this type of protection is necessary as the world becomes increasingly wireless.

"People can do everything they do at their online banker or brokerage through a Palm Pilot or other palm device wirelessly, " Mr. Jordan said. "We're bringing the Royal Bank's online presence and porting it to wireless devices."

Royal Bank's interests in wireless communications is no surprise to financial analysts.

"There are a number of different innovations that banks are [adopting] in order to make sure they have access to all kinds of distribution that are available and if wireless is an option, then they want to be there," said Michael Goldberg, financial analyst for HSBC Securities.

Sona Innovations plans to market its security solutions to other businesses interested in taking advantage of wireless services.

"We are currently in discussions with other financial institutions and what we plan to do is provide our applications and co-brand them to meet our clients needs," said Mr. Jordan.

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