Convergence in electronic banking: technological con-vergence, systems convergence, legal convergence

AutorAmelia H.Boss
Páginas85-115
CONVERGENCE IN ELECTRONIC BANKING:
TECHNOLOGICAL CONVERGENCE, SYSTEMS
CONVERGENCE, LEGAL CONVERGENCE
Amelia H. BOSS *
Trustee Professor of Law
Drexel University Earle Mack School of Law
SUMMARY: I. CHANGES IN PAYMENTS: A LOOK AT THE NUMBERS.—1. Electronic Payments.—2. Pre-
paid Card s.—II. THE METAM ORPHOS IS OF THE CHEC K: F ROM PAPER TO DIG ITAL
INFORMATION.—1. Payor Bank Truncation.—2. Depositary Bank Truncation or Electronic Check
Presentment.—3. Electronic Check Negotiation and Check 21.—4. Elimination of the Paper Check by
the Depositor: Remote Capture.—5. Remotely Created Checks.—6. Use of Checks to Initiate Elec-
tronic Funds Transfers.—7. Conclusion.—III. FROM PAPER TO PLASTIC: OF CREDIT CARDS,
DEBIT CARDS, AND OTHER PLASTIC DEVICES.—IV. MOVING AHEAD: CONVERGENCE IN THE
LAW OF PAYMENT SYSTEMS.—1. Payments Reform in the United States.—2. Payments Reform:
Preparing for the European Union’s Payment Systems Directive.—V. CONCLUSION.
With the emergence of the electronic age, convergence has become a con-
stant theme. Initially, the term convergence was used to describe the con-
vergence of the means of communication: cable, telephone or broadcast-
ing. Once distinctly separate means of communication, today one can use the
telephone over cable, or receive certain broadcast programs over telephone
wires. More recently, there has been digital convergence: a phenomenon that
has been observed in a variety of information technology industries: hand-
held computing, telecommunications, consumer electronics, networking, res-
idential broadband and broadcast video, among others. It has been observed
that this digital convergence increases the value and flexibility of products
and services, as well as increasing the interchangeability of products that
were previously in distinct industries 1. As more and more payment systems
* This paper was prepared for the Congreso Internacional sobre Derecho del Comercio Electrónico
y Sistema Financiero, Seville, Spain, May 2009.
1 See Ravi MANTENA and Arun SUNDARARAJAN, Competing in Markets with Digital Convergence
(June 2004). Stern School of Business Working Paper No. EC-04-12. Available at SSRN: http://ssrn.
com/abstract=556463.
86 CONVERGENCE IN ELECTRONIC BANKING: TECHNOLOGICAL CONVERGENCE...
are taking advantage of the benefits afforded by technology, these payment
systems as well are experiencing convergence — and indeed convergence
has emerged as a persistent theme in the payments area.
The European Union has recognized the importance of «convergence» in
the payments arena. The Single Euro Payments Area («SEPA») initiative in-
volved the creation of a zone for the euro in which all electronic payments
are considered domestic, and where a difference between national and intra-
European cross-border payments does not exist. The 2007 Payment Services
Directive 2 went even further in creating single, cross-border deposit ac-
counts and harmonizing payment obligations and laws for credit transfers, di-
rect debits, and payment cards across borders and payment instruments. The
Directive’s goal was to create a «harmonized» legal framework supporting a
Single Payment Market resulting in improved economies of scale and compe-
tition and reductions in payment system costs.
The United States is also experiencing «convergence» in the payments
area, but unlike in the European Union, that convergence is not being driven
by governmental mandate but rather by the evolution of the systems them-
selves. In particular, the distinctions that previously existed between paper-
based systems and non-paper-based systems are losing their validity, and the
systems that support the different payments models are beginning to converge.
Transactions processed through the check processing systems, the traditional
paper-based system, and transactions traveling through the automatic clear-
ing house systems are beginning to look more and more alike, just as transac-
tions utilizing debit and credit systems share many common characteristics.
Granted, the convergence is not yet complete: two transactions begun in the
identical manner by a payor may be processed in different ways by the payee;
in some instances, the payor has an option of which processing system to use,
as the convergence between processing systems is not complete 3. What is no-
ticeably absent is convergence of the legal structure that governs those sys-
tems. There still remain different legal structures —and different legal author-
ities— governing the various payment systems, resulting in divergence that
challenges the growth of newer payment systems in the United States.
This paper examines the way in which retail payment systems in the
United States are beginni ng to converge, both from a p ractical perspective as
well as from a legal perspective. In particular, it focuses on the convergence
occurring between the tradi tional pa per-based check processing system and
2 Directive 2007/64/EC of the European Parliament and of the Council of 13 November 2007
on payment services in the internal market amending Directives 97/7/EC, 2002/65/EC, 2005/60/EC
and 2006/48/EC and repealing Directive 97/5/EC Text with EEA relevance, Official Journal L 319,
05/12/2007, pp. 0001–0036, available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L
:2007:319:0001:01:EN:HTML.
3 It should be noted at the outset that the focus of this paper is on retail payments rather than
wholesale payments. There is still divergence between the retail and wholesale payment systems, re-
flecting the need for consumer protection in the former rather than the latter, as well as the practical dif-
ferences that exist in the market place for wholesale payments. It is not beyond the realm of probability,
however, to envision convergence between these two systems as well.

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