National City defects from consortium and joins Electronic Payment Services.

National City Corp. agreed last week to become the fifth equity owner of Electronic Payment Services Inc., the electronic funds transfer company formed by four superregionals.

In the process, it left the fledgling midwestern consortium that was formed to compete with EPS -- and its card brand MAC -- in disarray.

National City was the fourth of the original 14 banks in the midwestern group, Electronic Transactions Inc., to abandon the talks to join other networks.

More Muscle

First Chicago Corp. and Norwest Corp. are the two largest banks still in the group, though observers now doubt that the remaining institutions will be able to pull a network together under the ETI name.

National City's move makes EPS an even more formidable player in the Midwest, where it already poses a threat to shared networks because of the strength of several of its members, in particular Banc One Corp.

"When push came to shove, we chose MAC and EPS," said Joseph Parker, a senior vice president at National City.

He said the bank believed it would benefit from the marketing clout of the MAC brand, and from EPS's expertise with new technology and products.

EPS executive vice president Michael Douglas said that National City shares the existing owners' belief that ATM networks should be profit centers.

"We share a common vision about the value of these services and what they mean to the banking industry," Mr. Douglas said.

Other banks, in particular Mellon Bank, are said to be eyeing a stake in EPS. Neither Mellon nor EPS would comment.

Observers said they were not surprised by the addition of National City to the joint venture, which was formed out of the network businesses of Banc One, Columbus; CoreStates Financial Corp., Philadelphia; PNC Bank Corp., Pittsburgh; and Society Corp., Cleveland.

"Nat City is one of the most important payment system banks," said Liam Carmody, an analyst with Carmody & Bloom, in Woodcliff Lake, N.J. With EPS's existing and new equity partners, "I think the center of strength of MAC will move to the Midwest."

National City brings 1.2 million cardholders and a network of more than 900 automated teller machines -- called Money Center -- and an electronic funds transfer processing business. The businesses are in Kentucky, Indiana, and Ohio. Money Center will adopt the MAC logo.

National City gets a seat on the board of EPS, and the right to invest more cash to increase its share of the business.

The deal is subject to due diligence and regulatory approval.

Separately, the Federal Reserve last Thursday approved EPS's application to offer new data processing and nonbank activities to both retail merchants and banks that are members of its teller machine network.

The approval allows the company to:

* Offer government benefits such as welfare and aid to families with dependent children through ATM and point-of-sale terminals.

* Provide data processing, transmission and electronic payment services for stored value cards.

* Collect, process, and potentially sell information about the products and services purchased through retail point-of-sale terminals.

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