Digital currencies, like Facebook Credits, are set to replace cash as a primary method of payment in the future, according to Andrew Henderson, chief information officer of online bank ING Direct.
Speaking at an Australian Information Industry Association (AIIA) event this morning, the CIO said that Facebook Credits would likely render cash obsolete for person-to-person payments.
"Payments are becoming more than just cash-based payments. Facebook at the moment has Facebook Credits as an example. Now, why can't that be a system for exchange? The way that things are going, what Facebook Credits will do to cash is what online banking is doing to the branch. All of it is changing," he said, adding that ING Direct is facing a tough choice over whether or not to invest in digital currency platforms to offer its customers.
"The question for us is: do we go and build another network and invest millions of our customers' dollars into that network, or do we take a different approach and focus on what we're good at as a bank, which hopefully should be the trust side.
"We've got some challenges in that space at the moment. I think the challenge is to work out for us, what is our core business and how do we want to play in it and is it going to be around support for customer experience or is it going to be on the transactional side, or a bit of both? For us, that's a fairly significant question," Henderson told attendees.
Dr Rod Farmer of user experience research firm Mobile Experience added that trading in digital currencies would dramatically lower the cost of currency trading for banks.
"The whole premise of all of these virtual currencies is that the cost of actually trading is significantly lower. By delivering a virtual currency or a virtual product, we can reduce the cost of banking and payments significantly," Farmer said.
Other members of the AIIA panel added to the discussion, saying that big banks often cite a lack of customer demand for innovative products and platforms as a reason not to develop them. Communications director of digital firm Naked Communications, Brett Rolfe, said that the onus is on banks to lead the way with innovation, rather than waiting for an invitation.
"Henry Ford once said if I asked people what they wanted they would have said a faster horse," he joked.
Facebook has also been cited as a potential competitor to Australia's retail banks by consumer action group Choice, which told ZDNet Australia that the vast amount of information it has on its users make it a player to be taken seriously.
"[Facebook's] ability to anticipate customer needs and to help companies disseminate more efficient, competing banking solutions amongst its members, will make it a force to be reckoned with," Choice said.
Choice in its March report cited Facebook's own chief operating officer, who argued that "ultimately 20 to 30 per cent of Facebook revenues will come through the sales of virtual goods or the operation of an on-site currency".