By Turbett, Peggy
American Banker , Vol. 150
In the few moments it takes to figure out the dollar amount of a new pair of shoes in a Paris boutique, the American tourist's charge card has been validated electronically at an operations center back in the United States. And the purchase has been approved -- or disapproved -- back on rue Saint Dominique.
In the course of 24 hours, about 550,000 interbank messages are sent through the Brussels-based SWIFT network directing financial transactions around the world.
This year, one financial services company -- American Express -- will spend half a billion dollars on information processing systems and communications networks.
In each case, data are traveling across national boundaries to help complete a financial transaction. The buzzwords are transborder data flow. And as services and financial industries increase their reliance on developments in computer technology, maintaining the free flow of data across borders becomes more and more essential to the success of operations and profit margins.
The speed and ease of today's financial transactions due to advanced computer technology have revolutionized and internationalized the business world.
While data traffic is currently traveling as fast as technology can fuel it, a number of yellow lights are springing up, and there is concern in the financial community that national legal barriers will turn those lights to red.
Just as countries are realizing that access to information technology can mean power and profit, there is also an increasing awareness that the free flow of information across borders may have serious implications for private citizens and a nation's security and economy.
As a result, a variety of laws, restrictions, and guidelines have emerged on the national and international level to harness global computer data traffic. And while the flow of data has not been directly prohibited, the potential for impeding what has become the vital infrastructure for many multinational corporations has caused a great deal of concern. Paper Tiger
"Transborder data flow is like a paper tiger," said LLoyd Isaac, vice president of strategic planning at the Bank of America. "There are many regulations and laws on the books of many countries. Many are never enforced nor are they intended to be enforced. If they were, the potential effect on multinationals could be great. Any multinational company should be aware of this."
Formally, according to Karl P. Sauvant, transnational corporations affairs officer at the United Nations Center on Transnational Corporations, transborder data flow refers to the movement of machine-readable data across national borders for processing, storage, or retrieval, whereby at least one computer is involved on one side.
The degree to which international businesses are affected varies widely, but service industries dependent on telecommunications, particularly financial service providers, are most sensitive to the effects of restrictions. A study published by the New York-based Conference Board in September 1984 explored the impact of data regulation on international business management. The results showed that while the impact so far has been minimal among a variety of industries up to the present time, concern is slowly growing among all.
Within the financial services industry, the potential threat is greatest to the handful of top-ranking financial institutions involved in significant international trade. (The Bankers Association for Foreign Trade, for example, has less than 200 members, whereas the American Bankers Association may have up to 13,000.)
Why then has such a ground swell of concern over data flow restrictions raised the voices of former Citicorp chairman Walter Wriston, current ABA president J.G. Cairns Jr., and W. Robert Moore, the first American to be chairman of SWIFT (Society for Worldwide Interbank Financial Telecommunication)? …