The Financial Crisis Inquiry Commission’sreport has not minced words when it comes to doling out blame forthe financial crisis, and that includes the role that federalregulators did not play in overseeing the industry. This does notbode well for any anticipated rollback of the Durbin Amendment ormuch of the Dodd Frank Reform Act –notwithstanding thesaber-rattling pronouncements of political parties. One can imaginethat these agencies will not want to see the wind taken out oftheir new sails before they’ve even left the harbor.
This is another unintended consequence of the recession – thecreation of a legislative and regulatory purpose that has to proveits worth to the market. In this case, the focus of that purpose isfinancial institutions, who will not be let off easily. It appearsthat the U.S. is moving into a period where federal legislators andregulators may realize that they have to play a much more prominentrole in the shaping of our industry.
In some cases, this may be beneficial. I would cite security as anexample where creating a more cohesive infrastructure makes sensefor all stakeholders and builds trust – especially in emergingpayment applications like mobile (see our recent report on EMV). In other cases, they may betossing out the baby with the bathwater as the proposed debitinterchange fee models threaten to commoditize a market that hasyet to produce a valid replacement for itself. This may cause arush to development and expose the pay now industry to furtherrisk, reigniting a push towards credit payment products beforeconsumers are ready, and disenfranchising larger groups of thepopulation from access to mainstream financial services.
However, I believe the train has left the station. There will bestops along the way, but it’s on a track that is not going to veeroff in another direction anytime soon. We’ll have to wait for themarket to do that for us.