Mobile payments to provide rich pickings for the banks

Banks could substantially increase their revenues by providing IT services to telecoms companies wishing to issue electronic...

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 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.

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