SAN DIEGO - In their latest joint appearance before a card industry conference, the presidents of MasterCard and Visa last week added some notes of hard reality to their often-expressed optimism regarding new technologies.
Providing the grand finale of Faulkner & Gray's credit card forum in San Diego, H. Eugene Lockhart of MasterCard International and Edmund P. Jensen of Visa International outlined how they see home banking, on-line services, and chip cards emerging, but each executive's outlook was grounded in current issues.
Mr. Lockhart was a bit more cautionary, expressing concern about rising delinquency rates, declining profits, and the likelihood of regulatory scrutiny as cards continue to claim a larger share of the payments currently done by cash and checks.
He implored his audience not to forget that the "good old credit card is going to fuel whatever happens in the future."
"No one is talking about the basic profitability of the card," Mr. Lockhart added in a brief interview following his speech. "There is too much emphasis on the brave new world."
Mr. Jensen also emphasized the importance of plastic as we know it.
"While, long term, many of these new delivery channels may not require a card, Visa is adopting a consumer 'card-centric' system as one means of secure access," said Mr. Jensen. "It is our belief that, for now, a card provides the best way of serving members."
Mr. Jensen and Mr. Lockhart agreed that forming partnerships will be a key to offering the electronic commerce they envision.
Mr. Jensen cited as one example Visa's alliance with Microsoft Corp. to develop a secure method of payment over the Internet. He said other opportunities are under exploration.
"Some strategic initiatives will require funds beyond what we can develop out of current revenue and skills," said Mr. Jensen during a meeting with reporters.
Visa and Microsoft plan to share with MasterCard certain aspects of the encryption technology they are developing. But Mr. Jensen said the associations will not collaborate on everything - raising an issue that might meet with some rank-and-file disagreement.
The keynote speaker at the conference, Jeffrey P. Neubert, chairman and chief executive of Banc One Diversified Services Corp., called for less MasterCard-Visa competition and more cooperation on significant projects like developing new payment systems.
Mr. Neubert said his organization would not work exclusively with one association, despite the fact that Banc One Corp. is represented on Visa's U.S. board of directors.
When asked to respond to Mr. Neubert's remarks, Mr. Jensen said it is important for Visa and MasterCard to continue competing vigorously with each other. He added that the associations work together in areas of mutual interest, including privacy policies, digital payments, and standards.
Mr. Lockhart and Mr. Jensen also addressed the evolution of debit cards, which they say they believe will be linked to credit cards eventually.
"Some bankers worry that credit will be replaced by debit. That's an unfounded fear," said Mr. Jensen.
Mr. Lockhart pointed out that differences in interchange fees will present a challenge to combining credit and debit on one card.
Regarding other product and technology innovations, Mr. Lockhart discussed the thin line that the associations must tread. "The associations are caught in the insidious bind of defining the railroad tracks and waiting for the business case to be made," he said.
When the two executives spoke at the end of the three-day conference last Friday, the audience had dwindled to about 250 from the announced attendance of 1,000.
Mr. Lockhart had arrived in San Diego on Thursday evening and dashed back to the airport for a flight to New York immediately after his speech. He appeared rushed and somewhat annoyed at the small audience.
"There are only a few times a year the industry gets to hear from both (Mr. Lockhart and Mr. Jensen) at the same time," said a MasterCard spokesman. "It was upsetting that there was such a small crowd."
