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Weekly Wrap: Ancient Pots and Payments; Putting Skin in the Game

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POTSHERDS REVEAL PAYMENTS' FUTURE: As the payments industry introduces wave after wave of new platforms and technologies, it can seem as if customers will soon have more ways to purchase than items to buy. But strategist Lauren Pollak argues that payment options won't keep multiplying forever. Archaeological studies of ancient pottery have proved that products tend to expand in variety before contracting. "Based on the patterns that have characterized human innovation for centuries, we can reasonably conclude payment technologies' current period of divergence will soon be followed by a period of convergence," Pollak writes. Pollak recommends that executives prepare for the next phase of the cycle by developing interfaces that are compatible with a number of technologies, making small investments in an assortment of payments options and assessing the strength of platforms' connections with suppliers, merchants and consumers.

CURBING RISK APPETITES: Regulators have yet to end too-big-to-fail because bankers keep finding ways to work around new rules and take more risk, according to consultant J.V. Rizzi. "It is as if there is a Newton's third law of banking: for every regulation, there is an equal and opposite reaction by bankers," Rizzi writes. The solution? Give bankers incentives to act with more care. If bankers knew their jobs and fortunes were on the line and that illegal activity could result in jail time they'd be a lot more likely to exercise restraint, Rizzi says. "The regulatory focus must shift from prohibiting undesirable risk behavior to managing the incentives that cause that behavior," Rizzi says. "Otherwise, risk-taking simply morphs to fit bankers' risk appetites, leaving the overall threat unchanged."

Also on the blog: Dynamic currency conversion fleeces unsuspecting travelers and gives the payments industry a bad name, according to Eric Grover of consultancy firm Intrepid Ventures. The best way to put an end to the practice? Start giving customers full disclosures of the extra fees they'll be charged if they choose to pay in their home currency.

Former New York State Superintendent of Banks Richard H. Neiman recommended a way to fortify the dual banking system: let states participate in a consolidated exam force that will allow them to tap into federal resources without ceding responsibility to federal agencies.

Cities including Los Angeles, Miami and Baltimore have sued banks over charges that their subprime lending practices disproportionately hurt minority borrowers, adding millions of dollars to the cities' tabs during and after the housing crisis. A recent Supreme Court ruling could provide lenders with a fresh defense against municipal disparate impact claims, according to lawyers Valerie Hletko and Ann D. Wiles.

Biometrics could change the way bank customers access their financial information but first the technology has to address a few big challenges. Frank Natoli Jr. of ATM manufacturer Diebold explains how biometric technology can win acceptance by tackling customers' privacy concerns and speeding the authentication process.

Fraud has the potential to ruin customers' trust in their financial institutions. The financial services industry can win consumer confidence by developing methods of identification, authentication and privacy protections that are secure and convenient, according to Frank Caruana of Early Warning.

Achieving an all-time first is normally a great feeling. But American Bancorporation probably had a very different reaction upon becoming the first bank holding company to be forced into involuntary bankruptcy by holders of its trust-preferred securities. Dave Jefferds of DealVector explains how regulators can prevent a wave of similar bankruptcies by letting banks tap into excess capital to pay off creditors.

CALLING ALL BOOKWORMS: It's almost time for BankThink's annual summer reading list for bankers. Please send your top must-read picks to sarah.todd@sourcemedia.com and include a few sentences explaining what the book is about and why you're recommending it.

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