The banking industry is waking up to what corporations from General Mills to General Motors have long known about the power and importance of brand identity.

Those lessons have hit home in the consumer payments industry, where the collectively owned MasterCard and Visa brands face the likes of Discover and American Express, the latter revealed by numerous consumer surveys to be the strongest of all names in financial services.

What is to become of these identities and icons, not to mention those of the thousands of financial institutions in the United States and their multitudes of product and service names, in a world where more and more business will be done via electronic means, rather than face to face? How does an institution or product stand out from the advertising clutter or from the long menus of similar offerings that the Internet and other on- line computer services are likely to provide?

Such questions led the American Bankers Association to schedule a panel discussion on "The Importance of the Brand," which was one of the highlights of the national bank card conference in New York last week, and which is excerpted below. It gave the ABA an opportunity, for the first time in many years, to include speakers from nonbanks like American Express and Sears at this annual event.

The branding issue came up elsewhere at the conference. Kenneth J. Howes, head of group card development for Midland Bank of London, chided U.S. banks for their "Christmas-tree approach to card branding" - the multiple marks common on cards and automated teller machines. The likelihood that "credit and debit can reside on the same smart card will make branding more critical," he said.

Internet expert Rosalind Resnick, noting that corporations are establishing their presence and brand through home pages on the World Wide Web, pointed out that the domain name "" belongs to the American Stock Exchange. "I'd like to know how American Express let that one get away," she said.

JOANNE BLACK, consultant, Business Dynamics, Nyack, N.Y. (panel moderator): Studies done by the Coalition on Brand Equity show that it costs five times more to get a new customer than to keep a good customer. In some industries a 5% increase in brand loyalty increases profits 85%. Is the payment systems business, with its multiple brands, multiple functions, regional, national, and international networks an exception to those rules? Are brands irrelevant when they get lost in a sea of logos on a card?

Our business does seem to differ from other large consumer product categories. Pepsi-Cola spends over $1 billion a year supporting the brand; MasterCard and Visa spend about $100 million - in a business with more revenues than Pepsi and Coca-Cola combined. Impressively, those logos on cards give them instant recognition and credibility worldwide. MBNA, Capital One, Advanta, and First USA have achieved their impressive results without advertising, which is considered the cornerstone of branding. Citicorp, historically a major advertiser, has diverted its budget to card acquisition, with great results.

Were these successes achieved without branding, or are the tools and techniques of branding becoming more sophisticated and complex? Strategic alliances, like Citibank's with American Airlines, have effectively built brand image and loyalty for the partners. Affinity marketing builds a strong and unique relationship between the card brand and target constituency ... What will be the effect of new technologies? Will they provide an opportunity for brand-name technological companies to enter the category? It isn't hard to imagine a Win card from Microsoft, or an In card from Intuit.

How important is brand image and awareness in payment services in general, and your product specifically?

JOHN N. DELANY, divisional vice president of credit marketing, Sears, Roebuck and Co., Hoffman Estates, Ill.: For most of our consumers, brand image and awareness is largely unimportant because our products inspire relatively little emotion from our customers. A Porsche is not just a car, but a bank debit card is just a debit card and performs pretty much like any other. We're really in the business of being "consumption facilitators," helping customers get the cool stuff to wear or the cool car to drive. We're not an end, in and of ourselves, and we never will be. Image is everything to "the few and the mighty," like MasterCard, Visa, American Express. They fight the big market-share battles, and in a commodity product category. Their ad budgets, though small next to Coke and Pepsi, are large in our industry, and it's expensive to build a personality around a commodity product.

For the Sears card, image and identity are important, but it's the image of our store that really counts for the customer. Our research shows the card's image is inextricably tied to the store.

PAUL CUSENZA, vice president, director of value-added alliances, Capital One Financial Corp., Falls Church, Va.: The role of a brand is to quickly communicate something to the customer. At the point of purchase, it may be McDonald's or Crest that projects an image and a message. It also establishes credibility. You have to have it in payment systems because it relates to money. Visa and MasterCard may spend only $100 million on advertising, but go in any store and the logo says, "We accept." Whenever I take out a card, there is a "billboard" on it. The Visa, MasterCard, American Express, and Discover brands and their credibility are constantly being reinforced.

For an AT&T or a General Motors, capable of issuing millions of cards and reinforcing their messages, it can make sense to establish a brand alongside a MasterCard or Visa. But those who follow may find the benefit of a similar approach is less. At Capital One, we believe Visa and MasterCard gets us in the door. We take an information-based approach, focusing our resources on finding out who is the right customer, what is the right offering for that customer and the right time to make it. Once we're in the door, we are making a direct communication to that customer, and by not investing in TV advertising, we can pass along a better price, which may be of greater value to that customer than the brand image.

DUDLEY M. NIGG, executive vice president, direct distribution, Wells Fargo Bank, San Francisco: I come at this from a different perspective. With banks, you look at brand, image, and then ownership, and soon we come to the self-satisfying belief that we own the customer. But the customer is not owned by anybody. If we get too fixated on brand, the danger is that we'll begin to believe our own rhetoric.

In the past, I was in the investments business and we assumed that a bank offering these products would do well because of the security that customers would see in a bank. But before long money poured into companies no one ever heard of because they offered higher rates of return, and nobody gave a damn about security. Those competitors are now household names, like Fidelity and Vanguard.

The brand per se is never enough. Unless it goes hand in hand with value, no one will buy it.

Another danger of being fixated on the brand is you can miss the potential alliance. We can get so worried about whether our name or the other name will go on top that the deals won't get done. But our future in the payments area will depend on alliances. It's too big a deal for any one institution to pull off. We'll have to learn to meld and reshape branding.

DELANY: All the names we come across in payment systems are not brand names. MasterCard, Visa, and American Express are brand names, but as all these new products emerge and are named, does that immediately give them the stature of a brand? To me, a brand carries value above and beyond the basic utility of the product. It sparks an emotion that makes the product utility bigger than you are actually consuming.

NIKKI WATERS, senior vice president, marketing, Star System Inc., San Diego: In our industry, brand denotes access, acceptance, and convenience. It tells the consumer if a card will be accepted at a given ATM or retail location. If the use becomes widespread and there is not universal acceptance, there is still a great, emotional desire in the consumer's mind for the card not to be rejected. This consumer may see the mark as an "access identifier" more than a brand.

NIGG: Right. The reality is that the brand is important only because there is not universal acceptance. Let's assume one day we can take a smart card anywhere and it will work. Why do we need to know whose smart card it is?

DELANY: In that sense it's almost like a utility. You expect the electricity to be there when the switch is turned on. You expect to get cash when your card is in the ATM. I don't get particularly emotionally involved with my power company, but I like the lights.

WATERS: Many of the regional networks have positioned themselves that way - as utilities for the financial and retail industries to ensure access. Because of the nonuniversal acceptance of their cards, the identification of the brand has been very important to the consumer.

BLACK: I hear you saying there is a distinction between identification and brand equity, which comes from people having a point of view about a brand that goes beyond that of a parity utility. It has to do with emotional responses, a loyalty factor. In some cases, brand ID - that I can use it somewhere - seems more important.

ANNE BUSQUET, executive vice president, charge card marketing, American Express Co., New York: I will take a contrary point of view. I think as our industry tends to commoditize itself, the brand will play a much more important role. The brand is the sum of the associations or the relationship between the consumer and a product or service. That bond may be rational or emotional, tangible or intangible, but it is critical because it will differentiate amid commoditization.

I see a tremendous evolution in brands. I agree there are a few megabrands in our industry, and there is a difference between those and product names. MasterCard and Visa are megabrands for acceptance. American Express created a megabrand on a completely different platform that includes acceptance, user image and identity, customer orientation, and customer service. That brand has transcended individual products over 100 years - the American Express card is only 35 years old.

Looking to the future, there may not be many new megabrands. We are more likely to see a proliferation of sub-brands and brands. To take an example, Coca-Cola is a megabrand but in some new products they have tried sub- brands (Diet Coke) and new brands (Sprite, Fruitopia). I presume Visa and MasterCard will try to develop new sub-brands and brands, depending on whether they want to reinforce their current brand equity or create new equity.

CUSENZA: It is important to regard networks separately from individual brands. Establishing a network - American Express, Visa, MasterCard, Discover - has a much higher barrier to entry than establishing the brand or whatever it is on the card that conveys acceptance. I think we will see more brands of this type appear. Brands communicate something to the customer up front. That's one element, but what are the value and utility that you can add to it?

The computer companies, telephone companies, cable companies are all looking at ways to participate in payment exchanges. I'd expect some new systems to emerge; some will survive, potentially creating new networks of some kind, and some won't.

WATERS: Do your customers feel you are the issuer and provider of the value of your cards, or that MasterCard or Visa is? That's a dilemma if the customer feels the same services are available from any organization.

CUSENZA: We are able to build a connection with existing customers who have a positive experience with us and who tend to continue doing business with us. That comes from knowing the company, rather than a brand seen on TV.

WATERS: We hear talk about leveling the playing field with new technologies. When a financial institution is on the Internet, what is to identify it and its relationship to the customer? If we can load a number of financial relationships from a number of institutions onto one card, the identities of the financial institution providers are at risk. Networks like Star System, Honor, or MAC have the access symbols that cardholders look for.

Branding will continue to be important as new technologies develop. Until acceptance is complete and global, brands will continue to emerge.

NIGG: No one should be confused about what is happening on the Internet. It is a public system; you pay to get on it, but once there you can move around it for nothing. As you move around you see a level of utility that cannot be matched by a private network, yet it's free and the private networks cost you money. At that point, I don't care what brand you've got, you ought to be asking, what is this public network and how much can it do for me?

Payments are facilitating devices, they help get things done. They are not naturally branded processes. They got away with branding because of the lack of universal acceptance and because people needed to feel comfortable. As that becomes less and less apparent, as in smart cards with multiple brands and multiple systems access, the need for branding in payment systems will be reduced and there will be a greater proliferation of providers. Unfortunately, the price and value will commoditize. The question for us is, how do we respond to an environment where the prices and margins reflect commoditization, in which there is no room for expensive advertising to promote brands?

DELANY: The Internet is a public asset, and it's tough to brand a public asset. There are "first mover" advantages in the branding game if you have the tremendously deep pockets to play it - to get into some of these emerging, utility-like markets and establish a brand.

NIGG: It has been said we are ahead of the consumer, but I don't believe that for a moment. We're miles behind. Consumers are sitting out there wondering why they can't do secure transactions on the Internet. It's our fault we haven't gotten there yet. The fact that 35% to 37% of American households now have a PC, and less than 1% are doing banking on PCs, ought to tell us that banks and not the people are the problem.

There are banks on the Internet that I've never heard of that are getting tremendous press, that are being "branded" as being available. There's a gap, and they are filling it.

WATERS: Some people will seek out smart cards and banking on the Internet, but not yet the vast majority. On-line point of sale payments were available in 1987, but they took off only in the last two years. Off- line MasterCard and Visa debit cards have been on the market 15 years, and a majority of consumers are just now coming to see value in the product and feel comfortable with the technology of taking funds directly from checking accounts.

NIGG: But in Australia, everyone uses debit cards. The reality is we can educate the customers any way we want to, and we have been slow to educate them in the power of some of the new devices and new brandings available to us. Other countries are way ahead. In Sweden, 80% of transactions occur electronically. In the U.S. it's 20%. We get hyped up to think we are leading the world in payment systems. Nothing could be further from the truth. We haven't moved forward in the utility area because we have so much invested in what I would call traditional branding.

DELANY: Yes, the brands to some extent hold us back from responding to what customers are telling us. Customers in our research frequently ask us, Why can't you do X? They are out in front, and we come up with rationalizations why we can't do X or are not willing to do X. A product that fills their needs will take off, like Microsoft and Netscape.

BUSQUET: If the brand is stopping us from evolving, it is because we are not managing our brands. Managing a brand is like managing a balance sheet. You have assets and liabilities. Your challenge is to move the assets forward and diminish the liabilities, which you do by understanding the brand equity.

BLACK: Brands can get in the way if you're stuck in the past, unwilling to respond to the marketplace. The banking community historically has been change resistant and has projected that onto consumers who are said not to be ready, when in fact we haven't educated them.

NIGG: Yes, but I would add that brands have their time. In this environment where something is not ubiquitous, you use a brand to get the message out. But there comes a time when things are commoditized enough that you don't need a brand, and you worry more about such things as, do I have the access points, or am I a facilitator. These are different from the payment systems per se.

BUSQUET: You are getting more provocative. Look at chicken. Nothing was more a commodity than chicken until Perdue came along. If in our industry all products are the same and there is no differantiator, we will not be very profitable over the long term. At the end of the day, brand will differentiate and command a premium, which is what Perdue did.

NIGG: I'm not saying there is no value in the brand. It's that the brand is best when it's at the cutting edge or offers the most value. People are not buying just the brand. They are buying value, which may or may not be associated with the brand. It helps to have a brand, but it is not imperative.

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