Academic journal article ABA Banking Journal

In Payments We Trust

Academic journal article ABA Banking Journal

In Payments We Trust

Article excerpt

You can fantasize about how, many ears down the road, a member of [GenY.sup.3]" finds an old pencil behind a walled-up partition, and wonders what it is. Noticing that one end is pointed with a dark spot on the tip, he rubs it against a wall and--lo and behold--it leaves a mark! "This could be useful," he thinks.

Dream on. How many people think papyrus and quill pens would be useful again? Or a Commodore 64? Technology never goes backwards.

Which is why Jeff Plagge had it right regarding the need for banks to stay up with payment system developments, when he said, "This is not optional." The Iowa banker is ABA's Vice-Chairman and the driver behind the association's Payments System Task Force. The group's mission, in brief, is to help ensure that new types of payments work together, protect customers, and allow access to all banks. (See story on p. 31.)

A challenge for banks in regard to payments is that they are caught between the inexorable march of technology and the ever-tightening hand of regulation.

But let's get one thing straight. The hotshots in Silicon Valley and the other tech enclaves don't have a lock on payment innovation. Banks, working with regulators and others, built the systems that handle 99.9% of the payments that power commerce around the world. We're not just talking about cards and checks but the huge, complex, "hidden" world of digital payment-and-clearing networks such as CHIPS and the ACH. Vast in scope and critical in function, these systems have been quietly operating for years before Apple, Google, and Facebook were even a thought. …

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