PHOENIX - The presidents of MasterCard and Visa stood together last week in a call for industry solidarity against potential predators in consumer banking and payment services.

In a rare joint appearance - at the Bank Administration Institute's retail delivery systems conference in Phoenix - Eugene Lockhart of MasterCard International and Edmund Jensen of Visa International put their respective associations forward as agents capable of preserving banks' interests in the rapidly changing, increasingly competitive payment systems field.

In speeches that barely mentioned competition with each other, both men emphasized the need to keep banks in control of customer relationships as nonbank competitors and technology companies threaten those historically crucial and profitable connections.

"Banks have to avoid fragmentation," Mr. Jensen said. He urged a record BAI conference audience of about 1,500 to "get on task and make sure the banking industry is driving the change."

Mr. Lockhart said, "I don't want to be in the business of facilitating the removal of control of the payment system from banks to others."

He said the industry must keep a grip on "the virtues of the banking system" - such as the standards, security, and capital investments that the card associations coordinate - to prevent a further erosion of bank market shares.

The executives' complementary messages, which they said were not planned ahead and were more gratifying than surprising, were the latest of several recent indications of the new era of diplomacy that followed their almost concurrent appointments earlier this year.

Speeches at the American Bankers Association bank card conference in September by Visa U.S.A. president Card Pascarella and MasterCard U.S. chief Peter Dimsey also had a "kinder and gentler" tone.

While they may still be bickering over which is bigger in debit cards and whether to permit banks to issue both brands of debit and commercial cards, the associations have been cooperating more on technical standards, notably in the emerging field of smart cards.

Mr. Jensen, putting distance between himself and previous generations of card association leaders, said he has no tolerance for "intramural competition" that distracts from MasterCard and Visa's common mission of maximizing members' profits from cards and payment services.

The show of unity extended to ensuring security of transactions over public computer networks like the Internet - a potential flash point given Visa's recent announcement that it would ally with Microsoft Corp. to develop a data encryption mechanism for card payments over such open systems.

Microsoft is the outside entity that bankers seem most ready to hate at the moment. Its proposed acquisition of Intuit Inc., provider of the Quicken software that dominates the personal financial management market, is seen as a play for banks' consumer relationships, and perhaps an attempt to preempt their plans for automated home banking services.

Mr. Lockhart last week referred to Microsoft as one of the companies capable of controlling the consumer "gateways" into interactive electronic services - a role he contended that banks should not abdicate.

At the same time, Mr. Lockhart said he shares the concern about security of on-line payments that led Mr. Jensen and Visa into the alliance with Microsoft.

The latter two companies have said they will publish a security specification next year, designed to address the concern that personal account numbers could be intercepted over the Internet and used illicitly.

"A whole industry is growing up around the Internet in an insecure fashion, and the two associations should define the rules for security" when bank cards come into a transaction, Mr. Lockhart said.

In an interview after his speech, Mr. Lockhart said MasterCard "got the same call Visa did" from Microsoft but chose not to make a joint announcement. "Ed [Jensen] and I have agreed that we will work together in the industry's interest on this," the MasterCard chief executive said.

Elaborating later in a press conference, Mr. Jensen of Visa said, "We will work with MasterCard and are starting that process right away." He reiterated Visa's earlier promise to make the results of its Microsoft project available to other parties.

Asked about some bankers' uneasiness about the Microsoft alliance at a time when it seems to be emerging as a competitive threat, Mr. Jensen blamed "bad communication on our part."

"The concern goes away when we explain what we are doing on their [members'] behalf," he said. "It is important that we as an industry not bury our heads in the sand. Like it or not, PCs will be a vehicle for many services including payments. Our members' cards and accounts will be used, and security is extremely important.

"It's an alliance for standards," Mr. Jensen continued, "for security over open networks."

Mr. Jensen said he looks pragmatically at Microsoft and its outspoken, visionary chairman, Bill Gates.

"It's fun to respond" to Mr. Gates' oft-quoted comment that banks are "dinosaurs" that Microsoft can replace. "But some of us ask, What if he's right? And some banks are working quite happily with Microsoft."

Leo Mullin, a vice chairman of First Chicago Corp., one of Microsoft's partners in developing a PC-based banking service, told the retail delivery conference earlier, "We've had positive experiences with Microsoft. I don't see what this extremism is all about."

Both Mr. Jensen and Mr. Lockhart stressed their Associations' ability to forge alliances as a key to banks' retaining control of customer relationships and the payment system.

"Banks must be the driving force [and can choose] the partners that will be best for them," Mr. Jensen said. Through Visa, the banks have the critical mass, brand power, and network connectivity "to be invited to the table" to discuss strategic alliances.

Mr. Lockhart urged bankers to "think of the card not as a product but as an interactive initiation device" that could serve as a key to the communications gateway through a personal computer.

In this way, the bank has a "first shot" at the relationship, rather than being one of many in an array of choices on an interactive menu controlled by others.

"If we bring several hundred million cards to the table, that would be attractive to any partner," Mr. Lockhart said.

Might the need to control the gateways be so critical that MasterCard-visa competition would be counterproductive, leading them down still another avenue of cooperation?

"Not at all - at least not now," Mr. Lockhart said. "Having two organizations promoting gateway services on [the banks'] behalf probably creates more opportunity for them. But it's too early to know what the ultimate answer to that question will be."

"I know the question is being asked in both associations . . . though not in discussions between the associations," Mr. Jensen said.

"I'm not sure where I'd come down on that, on the level of cooperation that may be necessary, possibly legally, or accepted by the members.

"To the extent that brands and product mix are important, it's still good to have a competitive structure. If I'm a banker, I'm more comfortable having two associations compete, and I can use one or the other based on product mix, product development, and technology."

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