Will it be the Fed's Action or Lack of Action, that will put a New Face on Financial Services?
On several new fronts, the Federal Government may be preparing to change the face of payment systems in the next millennium.
First a government task force spearheaded by Comptroller of the Currency recently adopted a mission statement and plan of action. The Consumer Electronic Payments Task Force was announced in September 1996, by Treasury Secretary Robert Rubin at an Electronic Money conference in Washington
sponsored by the Treasury Department.
The Task
Force was established to coordinate the Federal government's approach
to determining the need for consumer protection regulation in the
area of Electronic Payment Systems, from "Smart Cards" to the
Internet, and will first be considering privacy concerns during the
second quarter of 1997.
On an-other front, in December the Federal Reserve increased (from 10% to 25%) the amount of revenue a bank securities subsidiary could earn without running afoul of the Glass-Steagall Act of 1933. With this change, the Federal Reserve paved the way for the recently announced merger of Bankers Trust New York Corp., and Alex Brown Inc.
While congress continues to sit on the side lines and watch, several more major questions, which have always been a Federal concern, continue to linger:
While this uncertainty in the direction and financial security of banking may not yet be affecting you, consider the direction of banking's lucrative bankcard franchise.
It is being reported in a number of circles that the Justice Department has several inquires going concerning Visa and MasterCard. Business Week 1 notes that as of March 1997, the Justice department was "broadening its inquiry to question not only Visa and MasterCard rules, but also an industry structure allowing bankcard issuers to be owner-members of both Visa and MasterCard."
At issue is the question of how competitive the market really is, and how Discover and AMEX are being blocked from banks issuing their cards, based on Visa and/or MasterCard non-competition agreements.
Finally, the Federal Trade Commission (FTC) is being asked to look at Visa and MasterCard's position on requiring debit card acceptance by retailers who already accept credit cards.
Although this issue is already in the courts, with the suit by Wal-Mart, The Limited, and the National Retail Federation, it is said the FTC is looking at the allegations in the suit, concerning the cost of debit, as well as anti-trust questions.
While Visa notes that they are unaware of any FTC inquiry, some industry pundits are beginning to speculate on a future AT&T type breakup of Visa and MasterCard, that would be years in the making, perhaps ultimately returning the US to the world before duality.
1 Business Week, March 31, 1997, page 39.
