Burney Simpson

Richard G. Lyons Jr.,

It may not have the historic implications of the break up of Ma Bell, but the credit card industry soon could be remade. The once-obscure topic of interchange, the fee ultimately paid by merchants to card issuers, has generated some 40 merchant lawsuits against MasterCard International, Visa and several of their largest issuers.

Buffeted by pressures on both the macroeconomic and industry-specific microeconomic fronts, most mid-size and large merchants have outsourced their card programs to giant financial institutions. And more are expected to do so next year, say industry experts.

Katrina brought out the best in some major financial institutions, with American Express Co., Capital One Financial Corp., MasterCard International, Discover issuer Morgan Stanley, Visa USA and others each pledging $1 million to the Red Cross and other organizations helping hurricane victims.

Hurricane Katrina almost destroyed New Orleans, and nearly 90,000 square miles in the Gulf Coast were covered under a federal declaration of disaster. Lives lost rose into the thousands. Damages were estimated to be at least $125 billion, with 160,000 homes destroyed in Louisiana alone.

Cards&Payments this month introduces "Executive Inquiry," a continuing series of conversations with industry leaders on company strategies, industry trends, and observations on challenges and opportunities in the electronic payments field.

Fast food may mean small tickets, but it is no small potatoes. The National Restaurant Association projects 2005 sales of $134.2 billion for quick-service restaurants, or QSRs. Sales have grown 20% at Burger King, Arby's and McDonald's and their brethren since 2001, the association says.

Bigger is better. Size matters. Scale above all.

Competition has spawned technology and practices that have helped drive credit card fraud losses dramatically lower in the past decade. But big data breaches have a way of making the public see the entire payments industry as ineptly disorganized, and they highlight areas where cooperation and communication are needed.

When it comes to the payments industry, Hispanics are hot. The population is growing, and there is a diverse choice of media to reach the community. Issuers are hungry to form bonds with this powerful group of U.S. consumers.

Merchants continued their assault on the card associations' interchange fortress this spring, though it appeared to be more talk than a furious battering ram breaking down doors.

It is good that somebody knows what is going to happen. President George Bush proclaimed a new bill designed to reduce bankruptcy filings would lower the cost of credit. "When bankruptcy is less common, credit can be extended to more people at better rates," he said during the signing ceremony in April.

You know you are in trouble when a Texas Republican is after you. The string of security breaches and losses this winter of consumer data by several of the country's largest information brokers has politicians of all stripes asking questions and proposing legislation.

Last year proved to be an important turning point for American Express Co. as it continued to develop partnerships with major U.S. bankcard issuers. The company also reported strong results and maintained its so-called "spend-centric" marketing campaign.

It was a good year for bank card issuers in 2004. Losses were down, consumers continued their shift to using plastic instead of cash and checks, and cardholders were better at paying their bills.

Supporters of bankruptcy-reform legislation must feel as though they are on top of the world. First proposed in 1997, the concept has gone through dozens of versions and countless hearings. It also has been reviled by consumer advocates and has been defeated because of a variety of political machinations, including a presidential veto.

The payments industry is experiencing one of its most explosive periods of change, with American Express Co. and Discover Financial Services entering the bankcard market with both barrels blazing. AmEx seized the day, forging partnerships with two major credit card issuers, while Discover moved to break into the burgeoning debit space with the acquisition of a leading electronic funds transfer network.

Spring soon will be here, a time for renewal. Bears are waking after a rejuvenating winter rest. Some will be stronger than ever. For others, the long sleep will have made them a little older, a little slower and less likely to make it to the next winter.

If the Web is so huge, why can't America Online make a buck? And why are competitors snapping at the heels of Yahoo! Inc., which has emerged as a dominant Web portal?

With the big-spending season at hand, booming gift cards, reward perks and new technologies present payment challenges and chances for adroit merchants looking to grow.