WARSAW, July 4 Six of Poland's top banks have teamed up to create a payment system using mobile phones which they believe could grow to rival credit cards and serve as a model for the rest of Europe.
The banks, including the country's biggest lender PKO BP , said on Thursday the project was the first in Europe to be backed by financial institutions, which they believe could encourage take-up among customers and retailers compared with similar ventures set up by mobile phone firms and store groups.
If successful, it could challenge the business model of credit card companies such as MasterCard and Visa which mainly rely on customers carrying their branded credit cards to make payments.
Looking to tap rapid growth in smartphones, the system will allow customers with a smartphone application (app) to generate a one-time transaction code to pay for merchandise from a retailer with a special payment terminal.
"This will be a more competitive system compared to the credit card system," said Boguslaw Kott, CEO of Bank Millennium , a unit of Portugal's Millennium bcp.
"The credit card system will probably be put under a question mark in the future," he forecast.
MasterCard and Visa are not standing still, however, experimenting with their own mobile payments and virtual wallets in a bid to head off competition from technology companies and others in the expanding digital payment arena.
The system in Poland, which the banks want to have in place by the Christmas shopping season, will be based on a platform introduced by PKO BP, which also controls one of the country's top payment companies, eService.
Other banks taking part in the project are Alior Bank , Banco Santander's Bank Zachodni WBK , Commerzbank's BRE Bank and ING Group's ING Bank Slaski.
Combined the banks have 16 million clients, or 70 percent of the Polish market.
Poland's payment market is dominated by MasterCard and Visa, although many smaller merchants still only accept cash because of the charges they must pay. Poland's parliament is working on a bill that would mandate their reduction.
"It's clear the role of credit cards and the duopoly will weaken, which is not even the effect of high charges but mainly by technological innovation," said Michal Sobolewski, analyst at brokerage IDM SA.
"The one who comes up with a new, widely accepted mobile payment system will get the first mover premium and will be able to dictate the conditions," he said.
PKO estimates the value of non-cash transactions last year at 153 billion zlotys ($46 billion), including 85 billion zlotys in credit card payments.