In a rare show of unity, key bank trade associations and their rank and file have rallied around the payments issue. All support the notion that payment systems - and banks' access and control advantages - are of mutual interest and worth fighting for.
This unanimity did not materialize overnight, but it was manifest within a matter of days in early fall when yearlong efforts by the Bankers Roundtable and American Bankers Association climaxed.
The Roundtable, which represents top executives of the 125 biggest U.S. banks, delivered a manifesto from a senior-level task force. The banking industry was going to exercise leadership for a "new age of electronic banking," it vowed, with the creation of a Banking Industry Technology Secretariat.
The secretariat, known as Bits, with an independent staff and a board of bank chairmen and presidents, would be dedicated to ideals like security, integrity, customer satisfaction, and privacy, not to mention industry self-interests and keeping competitive threats at bay.
Meanwhile, the ABA's own payments system task force produced a report last month with similar bank-friendly arguments on four themes: system integrity, consumer interests, open competition, and "striking the right regulatory balance."
In contrast to the Bankers Roundtable technology task force, recently upgraded to a full-fledged committee, the ABA panel had a mix of big- and small-bank representation. It also gained credibility by having former Federal Reserve Governor John LaWare as a consultant.
Heading the ABA team was Murray Lull, president of Smith County State Bank and Trust Co., Smith Center, Kan. The Roundtable's chairman, by contrast, was Huntington Bancshares chairman and CEO Frank Wobst. His No. 2 was Edward Miller, senior vice chairman of Chase Manhattan Corp., the biggest banking company in the country.
Thus, big banker and small, money-center and regional and community, came out saying basically the same things about the payment systems as bastion of competitive advantage. They agreed on the need to defend and develop their asset collectively if they are to prevent nonbanks and high- technology companies from repeating what they have done to other historical bank strongholds with mutual funds, mass-marketed credit cards, and other innovations.
Also on the bandwagon: the Independent Bankers Association of America, which represents only community banks. One of its bankers will take a seat on the Bits board, as will one of ABA's choosing. The Bankers Roundtable names the other 10, but nobody in the smaller-bank camp seems to regard that as a problem.
"My leadership is very much awake to this issue of control of and access to the payment system," IBAA executive vice president Kenneth Guenther told American Banker. "We are looking forward to having a seat on the board."
Interviews with some of the principals revealed external forces and uncertainties played equally on banks large and small. The 1994 comment by Microsoft Corp. chairman Bill Gates that banks could be dinosaurs crystallized the thinking, and the fears.
"I didn't know how well the large and small banks would interact, but it could not have worked better," said James Culberson, president of First National Bank and Trust Co., Asheboro, N.C. It was on his watch as 1995-96 ABA president that the payments initiative was launched.
"The Gates thing applied across the board," Mr. Culberson said.
Mr. LaWare, Boston-based vice chairman of the Secura Group, said Mr. Gates and others "created a kind of paranoia." Bankers confronted the question, "Are we really obsolete?" and that led them to common ground.
Payment services and technologies are fundamental to banking, Mr. LaWare said. "They are not like syndicated sovereign credits that are only for the big banks."
With smaller institutions coming under federal mandates to handle automated payments such as electronic benefits transfers, "that may create a new opportunity for correspondent banking," Mr. LaWare said. "Big banks can return to providing a service to what we used to call 'country correspondents.' "
What can stand in the way of an industry that has rediscovered solidarity?
Aside from the hard work ahead for Bits and for an ABA payments staff headed by chief economist James Chessen, unpredictable competitive forces and technological uncertainties are in play as much as ever. And if these banking bodies hope to play a coordinating role, they may have to tangle with organizations that have more complex memberships and varied agendas, like MasterCard and Visa.
A few discouraging words came from Sen. Alfonse D'Amato, who said policy should encourage competition, not market protection. And in an American Banker letter to the editor, former Chase executive Deborah Talbot said: Collective action "is just where to turn if you want to follow the pack and stay out of trouble. But if you are a bank in the business of creating value and beating the competition by providing what the customer wants . . . then you don't want or need the collective approach."