Those banks still making do and mending with tired old legacy core banking systems must be gnashing their teeth at Commonwealth Bank of Australia's launch last month of its Kaching mobile payments application. The bank is claiming a world first with the service, which combines peer-to-peer  payments, social payments and near field communication technology, "making it the most all-inclusive payments app on offer by any banking institution in Australia and abroad", according to the bank officials.

Commonwealth Bank says that without its new core banking system, which delivers the ability to provide online, real-time banking, Kaching would not have been possible. In 2008 the bank began to replace its legacy systems with a real-time platform, based on SAP's NetWeaver technology, to underpin its end to end processing systems. The forecast cost of the four-year project is about A$580 million (£375 million); for that, Commonwealth Bank believes it will get a better customer service platform and simplicity in IT systems, infrastructure and business services, as well as "significant operational benefits and cost savings".

Kaching is one of the first fruits of the core banking investment. "None of this would be possible if not for our real-time platform," said Michael Harte, the bank's chief information officer, during the launch of the service. "We are the seventh largest bank in the world and have made a multi-billion dollar, multi-year commitment to real time systems. All of our products and services will hang off this real-time core. Our customers can get account balances in real time and pay immediately - and get advice of that payment - on any transaction. We are doing all this at a greater speed and on a greater scale than any other financial institution in the world."

David Lindberg, executive general manager cards, payments and retail strategy, at Commonwealth Bank said the app would reduce the reliance on traditional payment methods and transform and simplify day to day payments to friends, family, mainstream retailers and small businesses. "Mobile and online social payment is the next step in transaction technology," he said. "Already, more than half of our 10 million customers own a smartphone, and Australians are 65% more likely than the British to bank on their phones."

Kaching has many of the characteristics banks have been talking about for some time - it involves collaboration with non-banks, it taps into the growing use of smartphones and social media, and it makes use of NFC technology.

Banking Technology readers in Europe will be familiar with the idea that internet and mobile communications technology penetration is very high in Scandinavian countries, for example, but what they might not know is that Australia comes second behind Singapore in terms of smartphone use. Lindberg said Australia has unique conditions that would enable it to lead the world in advanced payments.

According to Commonwealth Bank research, more than 43% of Australians prefer to bank online and 30% of all online banking log-ons are now made via a mobile device. "The consumer is dragging banks in the direction of mobile banking," he said. Tablet computer use is also "exploding" he added. In addition to the enthusiasm for smartphones in Australia, Lindberg contends the country is also a world leader in contactless payment technology. "Initially banks and other organisations weren't certain about the business case for contactless. But I believe we in Australia are at a tipping point in contactless payment use." There are seven million MasterCard PayPass contactless cards in the market and 42,000 accepting devices. "This year use of contactless increased by 229% - this has been a sudden explosion." Once the main food retailers - Coles and Woolworths - adopt contactless technology, added Lindberg, almost all goods in Australia could be bought via a contactless transaction.

The initial version of Kaching is for the Apple iPhone, which is the most used smartphone in the country. A version for phones based on the Android operating system is being developed and will not simply be an adapted iPhone application, said Lindberg; rather, it will be designed to take advantage of the Android operating system.

In developing Kaching, Commonwealth Bank has recognised what many banks are now struggling with - that customers do not compare banks with other banks. "Our customers are comparing us with other firms such as Google and Amazon. They want a trusted, private environment that is simple to use and is convenient. They want to connect and transact with anyone they choose and they want the service to be always on and available," said Harte.

Commonwealth Bank makes much of Kaching's social payments facility, enabling users to pay their Facebook friends. If both parties to the transaction are Commonwealth Bank customers, the payment is instantaneous. If the receiving party is not, it can get payment by entering account details via a secure connection.

Harte said Kaching was based on the "real events in the lives" of the bank's customers. The various demonstrations of the application involved such real life scenarios. One was the ability to pay a tradesperson on the spot; an interesting scenario given the problems the UK banking industry has run up against in trying to phase out cheque use - if Kaching were available in the UK, the regulatory authorities may have been less critical of the banks' desire to phase out the costly payment instrument without having adequate alternatives in place.

Lindberg stressed that it was not enough for the technology to exist for an application to be successful - what was also needed was an ‘ecosystem'. To date mobile applications have been closed loop systems, but now the bank has brought together partners such as Facebook, handset manufacturers and the payment schemes. "The inherent problem with payments is that it doesn't generate that much money as a business. Therefore a bank needs partners who can bring different elements to the table, companies that make money in another business but by participating in payments, make the application stronger."