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iPhone 5 + NFC +Paypal = bank nightmare

If Apple launches its iPhone 5, complete with a Near Field Communications chip (the technology that allows wave-and-pay) in September, and does some form of payments deal with PayPal, it will represent a 'perfect storm for disruption' of the global payments market and force local banks to rethink their strategies a financial forum was warned this morning.

Speaking at an AIIA organised event in Sydney this morning, Rod Farmer, director of research and strategy for Mobile Experience, said that such a combination would be far more disruptive than Google Wallet given that it would be an open system and could be used for just about any form of payment.

Andrew Henderson, chief information officer of ING Direct, however said that the arrival of such alternative payments mechanisms did not spell disaster for the banks. 'The question for me is whether payments is a core system for a bank,' said Mr Henderson.

He said that other payments models, which were not cash based, were starting to emerge, such as Facebook credits. 'What Facebook credits could do to cash is what online banking is doing to the branch.'

Rather than focussing on the payments platform, banks would be wise to concentrate on their position as a trusted broker.

Speakers at the event also lamented the relative lack of progress from the Mambo group which is a coalition of the major banks and BPay which have been working on a hub based retail payments system which would see individuals assigned with a BPay number allowing peer to peer payments.

In the US in May Bank of America, JPMorgan Chase and Wells Fargo announced clearXchange which allows the three banks' customers to move funds directly from their existing cheque accounts using an email address or mobile number. That according to Dr Farmer meant that the Mambo initiative has effectively been 'leapfrogged'.

Despite the slow progress with Mambo, and recent rumours that NAB was withdrawing from the initiative, the four major Australian banks have already established an alternative payments model in New Zealand, called Paymark which offers a web payment service called pago that lets people load up their pago wallet with cash, and use that to buy from online retailers or send funds to other pago users via a mobile.

Mr Henderson said that in Australia; 'The larger banks are not really focussed on that space with their investments,' and were instead concentrated on their internal and core systems. Banks however could not afford to ignore the development according to Mr Henderson.

Nor can they afford to ignore Apple's work on using iTunes as the basis for an alternative payments model. There have been reports that such a system could be launched in 2012.

That according to Dr Farmer would be the 'possible giant killer.'



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