Bankers have gotten used to their credit card business' being a bellwether and godsend, leading the way in profitability and carrying the industry through its bad times.
Might the major annual conference for bank card executives, which the American Bankers Association held last week in Philadelphia, have been a leading indicator-in the negative direction?
All the trappings were there: a big convention-center ballroom, well- regarded speakers, a festive exhibit hall with 100 companies, receptions, and parties into the night.
But sponsors and planners came away with reason to speculate: What if they had this conference and nobody came?
It dates from 1971 and in its heyday was known for drama and excitement, centered on contentious "state of the association" speeches by the chief executive officers of MasterCard and Visa. They aren't what they used to be.
The head of MasterCard's U.S. region, Alan Heuer, didn't even speak this year. The word was that Mr. Heuer's schedule could not be accommodated.
The opening morning saw addresses by both Visa U.S.A. president Carl Pascarella-he was shifted to Monday after complaining about his original end-of-conference time slot on Wednesday, assuming most visitors would have left town by then-and Visa International president emeritus Dee Hock. But the atmosphere was so uncharged that no one seemed to care whether there was an imbalance.
ABA officials said attendance was down by about one-third, to 1,400. They said the number that counts, paying bankers, was 594-up 38% from the 1997 edition in Long Beach, Calif.
Trouble was that the service and equipment vendors, who foot most of the bill for what has historically been one of the ABA's most profitable events, did not believe the arithmetic.
Surveying an already thinned-out crowd on the second morning, Robin Abrams, president and CEO of Verifone Inc., said, "It looks as though some of the vendors must have slept in this morning."
With precious few prospects to accost on the sales floor, the exhibitors spent much of their time griping to one another, and the ABA staff was bracing for some collective hostility.
At least one of the biggest corporate names, a company that would be expected to be perennially on the sponsor list, reportedly skipped the meeting to reserve exhibit space for next September in Chicago.
The list of elite sponsors, who pay enough to put their logos up on banners, indicates where the power lies. First Data Corp., the processor now going through some restructuring, was the only "platinum" sponsor.
Those with gold status were Cardservice International, which First Data partly owns; the State of Delaware, home to several major card issuers; MasterCard International; First Data rival Total System Services Inc.; and Vital Processing Services, a joint venture of Total System and Visa U.S.A.
Seven others were at the silver and bronze levels; Visa was not one of them.
Philosophical and jesuitical themes threaded through the conference.
The keynote speaker last Monday, MBNA America Bank chairman and CEO Charles M. Cawley, described some of the hard-nosed business strategies that made MBNA second to Citicorp in receivables, with the lowest chargeoff rates and best customer-retention record among the big issuers.
He boiled it down to a golden rule: "treating our customers-and employees and investors-the way we want to be treated."
"A lot of old-fashioned terms keep weaving back in to what we do," Mr. Cawley said, focusing on fundamentals in a business enthralled by technologies and data mining.
Injecting some structural reality as well, he warned that consolidation- perhaps the root of the conference's funk-would reduce the number of card issuers with $1 billion or more in receivables to 10 from 30 within five years.
The message to MBNA employees, he said, is "think of yourself as a customer. ... We treat people in the company like customers. If they feel good, they'll make the customers feel good."
Customer-satisfaction results are posted every day. Employees can increase their compensation by an average 15% as the scores keep improving.
Gov. Thomas R. Carper of Delaware traveled up I-95 to introduce Mr. Cawley and praise MBNA for "doing well by doing good" in the community.
Wilmington-based MBNA employs 20,000, half of them in Delaware. One- third of the 30,000 financial services employees in that state (population 750,000) work for MBNA.
Delaware, which became a credit card haven through the tax-friendly Financial Center Development Act of 1981, has its own golden rule, Gov. Carper said: "We treat our banks as customers. We make calls on them."
Religion lite became philosophy heavy when Dee W. Hock took the podium.
The founding president of Visa accepted an ABA lifetime achievement award. Unlike the two other honorees-Honor Technologies Inc. vice chairman David O'Connor and retired MasterCard chairman Arthur Ziegler-Mr. Hock was given an hour to deliver a speech far different from the combative ramblings that were his trademark before leaving Visa in 1984.
Mr. Hock heads a nonprofit called the Chaordic Alliance. The word is a meld of chaos and order. Out of that natural conflict, he contends, must arise organizational principles for the next millennium.
Today's institutions-public and private-are based on hierarchical and mechanistic assumptions rooted in Newtonian and Cartesian world views, which Mr. Hock blames for unacceptable wealth imbalances and environmental degradation.
"It is far too late, and things are far too bad for pessimism," Mr. Hock said. "The only failure is to fall short of dreaming all that we might realize."
Crusading with foundation support but without personal compensation, Mr. Hock appealed for donations to put chaordic principles to work. The ABA put in $25,000-presumably in lieu of a speaking fee.
Ethics was the subject of a panel discussion that Fraser Seitel, a one- time spokesman of Chase Manhattan Bank, led using a Socratic format developed by the Public Relations Society of America.
He took a newspaper reporter, bank card marketer, lawyer, and others through a scenario of a bank issuing a card to a college student who gets deeper and deeper into debt. Eventually, the student's parents become so enraged that they go to the press, and the banker must decide whether to face the bad publicity in media interviews.
Jeff Slawsky of Partners First, a joint venture of BankBoston Corp. and Harris Bankcorp, concluded, "We have to say something." Duncan McDonald, until recently general counsel of Citicorp's bank card unit, warned, "Be careful of your liability."
Mr. Duncan, a fastidious legal adviser, was somewhat polarized from Gerri Detweiler of the Debt Counselors of America, the closest to a consumer advocate on the panel.
She said banks must do more to educate young people about budgeting and finances.
Mr. Duncan argued against legal restrictions on credit to any population segment and for "treating adults like adults." When the student's monthly minimum payment doubled to $40, Mr. Duncan said he did not "reach for my handkerchief," saying it could be covered by part-time work.
"Sometimes the better way to learn is self-reliance and hard knocks," he said. "This is more of an Emersonian view."
John McGuire, CEO of Trintech Group of Campbell, Calif., and Dublin, enlivened the proceedings with a call to arms.
"There is a land grab occurring now in the virtual world, and I don't understand why the U.S. is not stepping up and taking its share," said Mr. McGuire, whose company competes with Verifone and others in the electronic commerce area.
He warned that U.S. merchants-he used Gap clothing stores as an example- will want to accept payments from other countries and are stuck with domestic-only credit card options.
"What are the U.S. bankers doing to secure and service the payment requirements of the new globally active merchants?" Mr. McGuire said. U.S. merchant-acquirers "risk losing their existing business" unless they make a move.
Several U.S. card issuers have ventured overseas but without "the success they hoped to achieve," said Richard T. Robida, executive vice president of First Data Corp.
Only Citicorp has "established a global brand name," becoming the largest issuer in Germany, India, Indonesia, Thailand, and Malaysia, Mr. Robida said. Chase Manhattan is strong in Hong Kong, BankBoston in Argentina and Brazil-but most U.S. banks "remain secondary" in foreign card markets.
Dwane Krumme, U.S. general manager for JCB of Japan, said Americans must be sensitive to cultural differences. "If we can be wiser about other cultures, success will come sooner," he said.
"It does take a long time to develop credibility in a new market," Mr. Robida said.
Sue McIver, director of the General Services Administration's services acquisition center, said NationsBank and Citicorp are the big winners of federal agencies' card business. All the contracts were up for grabs this year, and Citi and NationsBank each won more than 30% by dollar volume.
U.S. Bancorp has a 24% share. The other banks in contention-First Chicago NBD Corp. and Mellon Bank Corp.-are at 5% and 1%, respectively.
American Express Co. took itself out of the running, saying the business is not profitable enough.
Mr. Pascarella of Visa said his brand has garnered 80% of the government market, MasterCard 20%.
Larry Faulkner, the Internal Revenue Service's director of electronic payments, said his agency hopes to do its business electronically with 80% of taxpayers by 2007.
"Paper payments are more error-prone," he said. With credit cards, "we actually get our money faster."
The card industry has been lukewarm to tax payments because the cardholder must absorb interchange fees and the government is not accepting chargebacks. Visa has not agreed to participate, but MasterCard International, American Express, and Novus Services Inc. have signed on.
A banker asked Mr. Faulkner what would happen if a cardholder went bankrupt after paying a tax bill. Would the issuing bank be liable?
"That's probably true," Mr. Faulkner said. "I'm sure this will be tested in the courts."
As if the ABA didn't have enough problems, the convention center layout forced attendees to traverse the registration area used by the computer- aided design company Autodesk. Dennis Lynch, president and CEO of NYCE Corp., said he was "three-quarters registered for Autodesk" before realizing he was in the wrong place.
Speakers even quibbled about session titles. Mr. Cawley said he learned of his title right before his keynote: "Creating Sustained Profitability Through Building Value Relationships."
J. Stephen Darsie's topic, "Bankruptcies: The Warning Signs and Endemic Causes in Today's Environment," required parsing.
The vice president of Experian Strategic Solutions of Atlanta said, "I wondered what endemic means. I thought maybe they were talking about epidemic."
Edward D. Horowitz, corporate executive vice president of Citicorp, thought the conference slogan-"There's only one way to survive the evolution"-was soft-pedaled.
"Mother Nature or God does evolution," he said. "There was no industrial evolution, no French or American evolution.
"We are here to discuss revolution."
