Bankers can be a bit more relaxed about digital cash and other newfangled payment systems. They are catching on more slowly than the early hype had led them to believe.
Some of the committees and consortia that bankers and their associations hastily put in place have issued reports and recommendations, but the early sense of urgency seems to have waned, experts in the industry are saying.
Fears that new forms of money and payment would open a Pandora's box of financial risks and crimes have so far proven unfounded, and consumer interest in the new products has been limited.
"It hasn't moved exponentially the way everybody thought it would," said Michael C. Stenger, the agent in charge of the Secret Service's financial crimes division. "People are content with the payment system, they want to stay with the system they have."
To be sure, stored-value smart cards and some forms of digital currency are making inroads, and many observers anticipate their impact will only become more pronounced in the future.
At least one group, the Banking Industry Technology Secretariat, is taking advantage of the gradualism to make a play for banking industry control over the evolution of payment systems. The group, which has been spun out from the Washington-based Bankers Roundtable - just announced the beginning of a formal dialogue with vendor companies and others toward the goal of a rational electronic payments infrastructure.
The American Bankers Association, which, like the Independent Bankers Association of America, supported the Bankers Roundtable effort, has been able to pause for reflection.
About a year ago, the ABA assembled a Payments Systems Task Force. It met regularly and recommended, among other things, that only regulated depository institutions be allowed to issue stored-value cards and other electronic forms of money.
The climate has changed since the task force came together, members said. Though proud of their recommendations, they see no pressing need to translate them into legislation.
Back when the group was formed, companies like Digicash Inc., Cybercash Inc., and First Virtual Holdings Inc. were making a splash with Internet payment products whose workings seemed foreign. Today, though those companies and others are making progress, the hype has shown itself to be just that.
"Next year it may be different," said James M. Culberson Jr., a task force member and former ABA president who is chairman of First National Bank and Trust Co. in Asheboro, N.C.
The ABA's original task force has given way to a looser "steering committee," which, unless circumstances change, intends to do little but monitor the payment systems climate.
Mr. Culberson, chairman of the Payments Systems Steering Committee, said it met once and agreed to keep "up to speed" on what was happening. Absent any major developments, the committee will convene just once more this year.
One reason for pulling back is that fraud has not reared its ugly head.
"I haven't heard of many instances" of fraud, said committee menber Charles J. Bock Jr., director of fraud prevention and investigation at Chase Manhattan Corp. "There are just a few that have been publicized."
Mr. Bock said it is difficult to determine whether companies are keeping quiet about fraud and security breaches or whether there are no problems.
In either case, he said, "Whatever we build, whatever we design today, whatever process or product we use today, we should at least throw up that cautionary light: What fraud concerns are there and how can we best address them?"
The slow growth of electronic commerce has given bankers who monitor it the luxury of thinking out potential problems in advance, Mr. Bock said. "We in our industry need to be proactive in the things we do to detect, prevent, and ferret out fraud," he said.
The ABA has had a "law enforcement focus group"-bankers who meet with law enforcement officials to discuss issues of mutual interest. Reciprocally, regulators and law enforcement agencies have established an interagency "bank fraud working group" to which they invite bankers. There's also a Bank Secrecy Act advisory forum sponsored by the Treasury Department.
All this talk has produced little in terms of concrete change or policy.
Happily, everyone is in agreement on some points.
"We're all going into this brave new world, and there needs to be a recognition that better convenience and efficiency for the consumer can also mean better convenience and efficiency for fraudsters," said John Byrne, senior legislative counsel for the ABA.
Even though legislation and policy are not on the front burner, participants in such panels said their exercises have been valuable in preparing for the future.
"The integrity of the payments system is essential if we're going to move forward," said David P. Taddeo, a senior vice president at Mellon Bank Corp. "We're trying to introduce a whole lot of new payments technologies. . . . It would set us back if the public lost faith in them."
Interest in security has not flagged, but the fact that most digital cash and smart card systems exist in small pilots today has tempered the rush to tinker with them.
For instance, in November 1995, the Treasury Department's Financial Crimes Enforcement Network held its first cyberpayments colloquium in New York. The event produced a book of papers on the topic, but no specific regulatory proposals. Since then, the agency has participated in international conferences on electronic money and has met with domestic vendors.
But the calmness on the emerging payments front has let the agency sit back a bit.
"We have been trying to let people know that our door is open," said its director, Stanley E. Morris. "The worst thing would be for them to come up with a system that became fraught with illicit activity."
That hasn't happened yet, and with credit cards remaining the dominant payment mechanism for on-line purchases, bankers and regulators are optimistic that payment tools of the future will continue to resemble those used today.
A recent study by New York-based Jupiter Communications predicted credit cards will remain the most popular payment mechanism for the Internet, and electronic checks and digital coins will find small but relevant niches.
"What we're seeing is that people stay with identifiable account numbers-whether it's their checking account or their credit card account- because they all know that they are limited in their losses," Mr. Stenger said.
In cases of fraud "they don't suffer a catastrophic loss, they suffer a $50 loss. So people tend to stay in that safety net. I think the banks and financial institutions realize now that it's not going to be a big movement to a brand new payment system."
At an early meeting of the ABA's original Payments Systems Task Force, Mr. Stenger warned members of the importance of working with law enforcement officials in the early stages of planning. He contrasted the situation to the introduction of credit cards, when banks did not share their plans with law enforcement. When credit card fraud became serious, the agencies felt blindsided.
"It's an age-old issue of marketing versus security," Mr. Stenger said.
The agencies took the position that some of the fraud could have been averted if they had been clued in earlier, and some hard feelings arose between them and the banks.
Mr. Bock of Chase Manhattan recalled the animosity and said the two camps have reconciled through their work on electronic money. He cited a January conference in Atlanta at which the ABA 's first "Security Partner of the Year" award was given to Ronald K. Noble, the Treasury Department's first under secretary for enforcement.
It was Mr. Noble, now teaching at New York University, who set up the forum on the Bank Secrecy Act. Many bankers credit him with opening up dialogue on money laundering and other fraud issues.
The electronic-commerce brainstorming "has had a tremendous impact," Mr. Bock said. "I think bankers are starting to get more comfortable working with law enforcement and regulators. Everyone is on the same wavelength."
