Losses from credit defaults keep falling, an explosion in smartphone payment systems and other technology has raised the prospect of new long-term revenue growth, and executives now believe they can mitigate the effects of the latest regulatory overhaul of the U.S. card industry.
"I am optimistic ... Nothing has been done that can't be rolled back quickly," longtime credit card executive Stephen Eulie said in an interview last week.
Eulie, who has worked at JPMorgan Chase & Co and Citigroup Inc, is now the head of First National Bank of Omaha's card unit, which runs credit card programs for companies, including Chrysler Group LLC.
He spoke to Reuters last week on the sidelines of an annual credit card industry conference hosted by the publisher, SourceMedia. As in recent years, much of the conference was dominated by discussion about new regulation -- from the lingering effects of a sweeping credit card law passed in 2009, to the so-called Durbin amendment to last year's Dodd-Frank financial reform law.
That provision would slash processing fees merchants pay banks every time a customer uses a debit card to buy something. The fee cuts would cost U.S. banks an estimated $13 billion in annual revenues under rules the Federal Reserve proposed in December.
U.S. banks are also struggling to grow other sources of revenue, as consumers resist adding to their credit card balances. Revolving consumer credit fell at an annual rate of 4.1 percent, to $794 billion, in February, according to Fed data.
Now banks are increasingly looking to new technology, such as mobile phone and ecommerce payments, to grow businesses in developing countries where people do not regularly use credit and debit cards.
Citigroup and American Express Co executives emphasized those opportunities at the conference, using their keynote speeches to discuss new types of payments technology instead of regulation.
"We need to figure out ways in which we can grow our business in a way that aligns with what Durbin's rules are," former Citigroup credit cards chief Paul Galant, who now runs a new payments group for the bank, told Reuters in an interview.
"The cards businesses are incredibly vibrant and power virtually all of us today. These businesses are not going to disappear because of a single law."
CLOUDS CLEARING
The Fed was supposed to finalize its rules on debit fee limits a week before the conference, but said in March it needed more time to sort through an overwhelming number of comments on its proposals.
The delay has given some bankers and credit card executives hope a broad industry campaign in Washington to repeal or delay the debit fee cuts will ultimately be successful. Opponents of the crackdown are pushing for a vote soon on a proposal from Senator Jon Tester that would delay the rule for two years.
While "the odds are looking better for a DC fix, I don't think it's something that can be relied upon by the industry, because there are so many procedural hurdles" in Congress, Morgan Stanley analyst Adam Frisch said during a panel discussion at the conference.
Key Republican lawmaker Representative Spencer Bachus urged hundreds of small U.S. banks on Monday to "slay the dragons" when they battle Congress over the debit fee crackdown.
The debit card fee restrictions are only part of a slew of regulation affecting the payments industry since 2009. A sweeping credit card law passed that year restricted the fees and interest rate changes that lenders could levy on their customers.
The Dodd-Frank law of last year also created a new consumer financial protection bureau that is expected to further scrutinize consumer lending practices.
Yet the atmosphere -- and attendance -- at the annual conference was the sunniest in years. About 750 bank employees, consultants and vendors descended on the Fontainebleau resort in Miami Beach, sipping pineapple-flavored water and sharing post-panel cocktails on a patio overlooking the ocean.
The crowd included employees of Bank of America Corp, JPMorgan Chase, Citigroup, American Express, MasterCard Inc and Visa Inc, as well as other large U.S. lenders and networks.
It was the conference's best attendance since 2008, when consumers started losing their jobs -- and stopped paying credit card bills -- in record numbers. As losses surged during the financial crisis, few lenders could afford either the expense or the reputation of sending employees to hobnob at a beach resort with the size and opulence of a French chateau.
But last week those employees were eager to talk about new business -- and to trade tips for recouping the revenue losses of whatever regulations are finalized. Banks, including JPMorgan Chase and Bank of America, have already started discontinuing perks on debit cards or added fees to checking account services that were once free.
As one conference attendee said, the industry is no longer focusing just on how to stop regulations: "Now it's, 'How do we get around it?'"
The shares of the top six credit card lenders were mixed on Monday, with American Express shares closing up about 1.2 percent and Citigroup closing down about 2.2 percent. (Reporting by Maria Aspan; editing by Andre Grenon)
-Thomson Reuters.
