The various stakeholders in the U.S. payments system may need to put their differences aside to stay relevant as technology advances. But whether wide-scale collaboration is practical or even possible is open to debate.
"It's going to be hard for this group [of bankers] to come up with something for the common good," says Robert Steen, CEO of Bridge Community Bank. "The community I serve is a paycheck-to-paycheck community, so I would have different goals from others."
However, banks have to "push in this direction" to develop common solutions, Steen adds. "Payments are our connection to the customer, our bread and butter. We lose that, we lose the franchise."
Earlier this month, the Federal Reserve Banks issued a report encouraging those in payments industry to seek common solutions to improve the speed, efficiency and security of U.S. payments over the next decade. The banks would like to see legacy payment systems remain relevant amidst the onslaught of mobile commerce technology.
Numerous banking and payments officials weighed the practicality of the Fed's call for collaboration this week at the annual Chicago Payments Symposium at the Federal Reserve Bank of Chicago, where Steen was a panel member during a session examining the events key themes.
"Collaboration is critical for success and there are many examples of it in payments, whether it is a bank allowing a provider to put their card in a mobile wallet, or PayPal being allowed to do ACH payments," says Carl Rutstein, senior partner with Boston Consulting Group.
However, any attempt at industry-wide collaboration may create an innovators-versus-banks scenario, says BC Krishna, CEO of MineralTree, provider of online payment services for banks and their merchant clients.
It's played out that way before. The collaborative effort behind the U.K.'s Faster Payments Service has "put the banks in a position to compete [with disruptors] in a way they could not before," says Carol Coye Benson, managing director of Glenbrook Partners.
"The banks now are able to put value-added service layers on top of this new system," Benson adds.
The payments industry faces a difficult journey, says Roy DeCicco, managing director at JPMorgan Chase.
"The Fed's strategy is going to be tough because many stakeholders are not interested in collaboration," DeCicco says.
A key question moving forward is what type of standards will take hold around EMV, mobile and digital payments, DeCicco adds.
The industry is full of examples of collaboration, says Boston Consulting Group's Rutstein.
The Merchant Customer Exchange, Isis, PayPal/Discover, Google Wallet, Square, The Clearing House and major card brands all represent collaborative efforts, Rutstein says. Those that succeed will have correctly identified a problem to solve, targeted a critical mass and defined a proper strategy, he adds.
"You have to create an environment in which each stakeholder wins," he adds. "And it has to be an industry-wide solution."