Smaller ATM networks in Midwest confident of survival.

With a merger between two of the Midwest's largest ATK networks looming, smaller systems in that region remain confident they will be able to survive con solidation of the electronic banking industry.

Since the 1980s, the number of regional automated teller machine networks in the United States has declined from more than 150 to around 60 today.

Network consolidation has been as least as rapid in the Midwest as it has been in other areas of the nation.

Winds of Change

Still, many observers consider the region stretching from Ohio to the Dakotas and Kansas to be overpopulated with electronics banking companies. This area is home to about a third of the remaining networks.

However, many of those same observers expect this situation to change soon, in part because the region is awaiting it first true megamerger between Michigan's Magic Line and Chicago's cash Station.

The merger, which has been discussed for years, is expected to come to fruition within the next few weeks. It is reportedly being driven by the desires of the largest financial institutions in the Midwest, including First Chicago and NBD Bancorp.

These two, as well as other large banks in the area would presumably own large chunks of the postmerger network.

Experts believe the creation of such a network heavyweight in this electronic banking market could spell the end for many of the smaller networks, which would be priced out of the market by larger competitors.

Technological Challenges

In addition, smaller networks are also expected to have a hard time keeping pace with emerging technologies, such as home banking services.

While executives at some smaller networks are resigned to the fact that they will eventually be absorbed by a larger competitor, a surprising number believe they have a place in the future of electronic banking.

There's no doubt about it, we're going to see a heavier form of competition," said Mark Horwedel, executive director of EFT Illinois, a Rockford, Ill., network that boasts about 845 ATMs.

"But when the average independent bank thinks a little bit about whether it wants to give its business to the big bank that owns the large regional network, I think we'll have a leg up," Mr. Horwedel added.

Mr. Horwedel and others contend that large for-profit networks are interested primarily in generating income for their owners. And while this incentive may drive the network to improve and diversify services, it can also lead to pricing schemes that are less than favorable to community institutions.

Pool of Smaller Banks

Working in favor of the smaller networks is the fact that there is a large population of community banks that have yet to join any network.

According to the American Bankers Association's 1993 National Community Bank Operations and Automation Survey, fewer than 60% of banks with under $250 million in assets are currently members of an ATM network.

But about 11% of banks in this asset group said they were likely to join one in 1994.

While these banks do not individually bring huge numbers of ATMs or transactions to a network, in aggregate their numbers could determine whether a network survives.

"There is enough interest in our network from community institutions in our area to keep us running for some time," said Dale A. Dooley, president of the Shazam network, which is based in Johnston, Iowa.

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