Cisco says payments represent 35% to 45% of banking revenue and 30%-40% of operating profits but warns that high-speed networks and mobile devices are opening up opportunities for new players to bypass the existing value chain.

As consumers increasingly use the Internet and mobiles to make purchases and payments, banks are subject to both customer attrition and revenue loss.

"In this new reality, electronic payments have the potential to disrupt the payments industry in the way that MP3 disrupted the music industry," says Cisco.

A poll of over 1500 US adults from the Cisco Internet Business Solutions Group (IBSG) found that alternative systems are already claiming a big chunk of the e-commerce pie.

Over a third (35%) of respondents cite "frequent" or "very frequent" use of options like PayPal, Bill Me Later, Amazon Checkout and Google Checkout for online transactions.

These alternative payment providers are also trusted by consumers for Internet transactions - 64% have faith in them, almost the same as the 67% for banks. The research also found that adults aged between 45 and 64 actually trust alternative payments provider more than banks.

But Cisco points out that whilst Internet merchant volume is growing, physical retailers still make up more than 90% of sales.

The vendor predicts that the next wave of commerce evolution will see physical retail exploring business models introduced in virtual commerce. This "connected commerce" will see consumers using portable, networked devices and merchants using IP point-of-sale systems for physical world shopping.

Cisco's survey found 23% of respondents expressed interest in using a mobile device to make contactless payments in physical stores. Among frequent users of contactless cards, 58% indicate a strong interest in swiping a handset at checkout, as do two-thirds of current mobile banking users.

Retail banks can take advantage of this by using their connections to merchant and consumer payment data to create new revenue models from advertising, cross-selling and value-added services surrounding points of sale.

Jim Greene, VP and global head of financial services, Cisco IBSG, says: "The profound shift in consumer shopping preferences, coupled with the pervasiveness of the network, presents a tremendous opportunity for financial institutions to evolve from simply being a provider of the payment element of a purchase, to being a uniting factor among consumers, merchants, advertisers, product manufacturers and payment providers."