To the Editor:

I read with much amusement and some dismay "Payments Inroads by Nonbanks Worry Bankers" (Oct. 16, page 13).

It seems bankers, fed by their consultants (in this case McKinsey, Furash, and Boston Consulting), are quick to identify nonbankers who might compete against them. And they are even quicker to stir up trade groups and alliances and other initiatives to convince the banking sector to move in lockstep against the nonbank enemy.

Whew! I get tired just watching all this protectionist activity.

The article is absolutely right about one thing: Paper-based check payments are processed through an archaic, fixed-cost system, the support of which can be an albatross around a financial service provider's neck. Why? The fixed-cost nature of the beast requires volumes, and volumes come from encouraging check usage. Any good bank marketer who promotes value to the customer via electronic commerce may be hampered by those trying to feed the hungry check dragon.

At the core of this issue, I believe, is that bankers want to use the payment system to limit or control competition for services, rather than compete head-to-head against more creative and less tradition-bound competitors who have no investment in archaic payment modes. The Bank Administration Institute is calling for a collective approach, a "path through the minefield" for banks. That 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, when the customer wants it, at a reasonable price, then you don't want or need the collective approach.

Don't get me wrong. U.S. banks have often forged financial transaction standards and provided operating consistencies that confound nations with a fraction of our volumes. But electronic commerce changes the rules of the game. The fabric of product delivery, accounting, proprietary, and commercial networks, and payment execution changes every day. Banks will not "control their electronic future" through collectivism, but through hard-core competitive superiority.

Nonbanks and banks not committed to a paper-based enterprise are free to offer both consumer and business/institutional customers a better way. It is a Business Economics 101 issue, not a technology one. It takes a combination of marketing research, planning, testing, packaging, and pricing; technology development and execution; creative production alliances; and well-honed salesmanship to win.

The game will be won by those who understand that the focus is the delivery of financial services, and the making of payments is inextricably linked to that delivery. Deliver value to the customer and you will control your future, electronic or otherwise. Make the control of the payment system or technology your goal, and you and the customer will lose.

Deborah L. Talbot

Pinehurst, N.C.

Editor's note: Ms. Talbot is a former senior payments executive at Chase Manhattan Corp.

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