Banks could substantially increase their revenues by providing IT
services to telecoms companies wishing to issue electronic money,
according to industry analysts.
The vision for future strategy comes as high street banks brace
themselves for the payments market to be thrown open to
competition, with almost any organisation allowed to provide
electronic payment services.
If passed, a draft European Commission directive would allow
non-banks to become electronic money institutions. Telecoms
companies, with their vast networks and billing facilities, are
ideally placed to offer customers electronic payment services for
low-value items.
One way for banks to protect their revenues from new competitors
would be to partner telecoms companies and help develop the payment
infrastructure necessary for mobile commerce.
Revenues in the mobile application market are set to soar from
$3.3bn (£2.3bn) in 2001 to $44.8bn (£30.9bn) by 2005, according to
analyst firm IDC.
Third generation telecoms networks will provide opportunities to
support electronic payment services. Potentially, vending machines
that accept payment from a mobile phone or PDA could create a huge
market for transaction services.
However, for the electronic payment market to take off, banks' IT
departments will have to develop new interfaces to update payment
systems for the Web. Here, application servers, such as IBM's
Websphere, will play a key role in storing Java-based information
which can be downloaded to mobile devices.
"Banks' existing payment systems are not used to taking
transactions through things like XML," explained Steve Barrie,
chief analyst at Bloor Research. "Most are EDI-based at the
moment."
Speaking at the City IT and the e.forum event last week, Dick
Clark, managing consultant at Consult Hyperion, said, "If an
operator believes it has the brand to build a successful electronic
money institution it will probably outsource.
"One potential scenario is for the mobile telcos to take and
process payments for small transactions. Traditionally, banks have
not been successful at micro payment schemes, such as
e-wallets."
However, banks should also prepare for a scenario in which telecoms
companies go it alone and develop their own payment infrastructure
systems, Clark added.
Nick.huber@rbi.co.uk