Thanks to multi-application smart card innovation, banks face a growing threat from telecom companies in electronic payments, according to a recent study from Killen & Associates. But critics argue that hundreds of years of pay-ment experience give banks a sizable competitive advantage, despite their "techno-lag."
The study suggests telcos can extend stored value phone cards to include other kinds of payments transactions and grab a bigger chunk of payments business, particularly automatic debit, or passive payments and purchases of under $10. Says Michael Killen, president of the Palo Alto- based research company. "If (telcos) bring out more functions on the card, they make money off the float and on the transaction." A telco may, for example, decide to team up with regional transportation companies and provide the card for bus, train and taxi fare. "They don't need to team up with any bank. Every bank that issues cards should be saying to themselves, 'the telcos are coming.'"