When Electronic Payment Services Inc. installed David Van Lear as its top executive in August 1993, the industry was abuzz with talk of the electronic banking juggernaut's first sign of vulnerability.
At the time, the company was less than a year old, and a change at the helm hinted at internal turmoil that had been largely absent in the Wilmington, Del.-based company.
The volume of murmurs rose when the Justice Department announced in March it was suing EPS over alleged anticompetitive practices at its MAC electronic banking network.
EPS officials took the talk in stride, noting that a large and aggressive organization in an industry known for chatter and occasional professional jealousy should expect such attention.
Now, as EPS heads toward its third year, some say it is as strong as it's ever been. The MAC network and Buypass processing units have shown impressive growth, and the network's industry-leading foray into smart card technology is proceeding according to plan.
EPS has grown accustomed to the' trendsetter nameplate that was hung around its neck in the summer of 1992 when Banc One Corp., PNC Bank Corp., CoreStates Financial Corp., and Society Corp. combined their electronic banking operations to form the company.
"Whenever you're the biggest kid on the block, you're the target of everybody else," Mr. Van Lear said. "But I think we've responded well to the attention and will continue to respond well."
But if the recent talk has not dramatically affected the way EPS comports itself, it is nonetheless a sign of a gradual shift in the way its competitors approach the company.
Once in awe of EPS and its potential, executives at many competing networks are now looking past the network's mystique and believe that they can compete effectively.
The turn of opinion may not have much short-term impact, but some network executives believe it could complicate EPS' efforts to expand through acquisition if some smaller networks come to believe they can survive in the company's shadow.
"If you're not respectful of them, you're a fool," said the president of one Midwest network, who wished to remain anonymous. "But I think many networks are coming to understand that EPS does not possess supernatural powers, and that their executives put their pants on the same way we do."
If not the Superman of the electronic banking indusry, EPS is not the mild-mannered Clark Kent either.
Indeed, as a for-profit, processing-oriented organization bent on exploring new electronic banking frontiers, EPS by most accounts serves as a blueprint for networks hoping to survive the consolidation that has seized the industry.
It is a role that EPS neither eschews nor relishes, according to Mr. Van Lear. To focus on the industry's perceptions, he said, would distract from the network's primary focus of providing the best possible products and services to customers.
Nonetheless, he recognizes that the network receives more than its share of scrutiny from regulators and from competitors.
The reasons for the attention the industry pays EPS are not hard to fathom.
For one, EPS' MAC network was by far the busiest regional in the country last year, in terms of switched transactions. On a monthly basis, the network handles about 69 million of these, which is more than twice the volume of its nearest competitor, Star System, based in San Diego.
While transaction switching is an important service for banks who belong to the regional networks, the endeavor does not generate much profit for the networks.
Since EPS -- unlike Star, Most, and several other electronic banking networks -- was formed to generate profit for its owners, it is also involved in businesses with more upside potential.
Prominent among these is merchant processing, in which EPS participates through its Buypass unit.
Buypass, based in Atlanta, is the fifth-largest merchant processor in the nation, gamering around $70 million in processing revenues in 1993, according to analyst reports.
The company, which was previously a unit of CoreStates, provides retailers with authorization, data capture and clearing services for a wide range of credit and debit card transactions.
Among the top merchant processors, it is perhaps best positioned to take advantage of the increasing popularity of debit point of sale, in which consumers use their ATM cards to make purchases at retail locations.
"As debit continues to emerge as a choice of payment at the point of sale, our debit experience and the industry niches that we serve will help us to secure a lot of those transactions," said Michael Douglas, president and chief executive of Buypass.
Mr. Douglas' position at the top of Buypass is a symbol of the importance EPS places on processing businesses. A veteran of PNC, he had previously been president of MAC.
Under Mr. Douglas' direction, Buypass is looking to expand its presence beyond supermarkets and gas stations into hotels and restaurants.
Helping his efforts will be the network services that Mellon Bank Corp. brings to EPS. Mellon, along with National City Corp., is awaiting regulatory approval of a 16.67% share of EPS.
EPS is actively looking to expand its presence in other businesses as well. For instance, it will launch what is expected to be the nation's first large scale smart card project in Delaware next fall.
The project will issue ATM cards that feature computer chips to Delaware consumers. After loading the computer chips with funds at ATMs and POS terminals, the consumers will be able to use their cards in off-line transactions at vending machines, pay phones, and other locations.
If successful, that project will be expanded across the whole network. To prepare consumers for smart cards, EPS is planning to implement several prepaid applications for regular magnetic stripe cards.
Mr. Van Lear said the technical standards for smart card infrastructure is the largest hurdle facing widespread use of the cards. EPS is committed to working with other entities, including Visa International, to ensure that those standards are established soon.
"There are a lot of people out there talking conceptually and philosophically about smart cards," said Mr. Van Lear. "Rather than philosophize, we're trying to develop the technology and the platform so that we will bring it to market more quickly."
Other issues on the horizon for EPS include the expansion of its ownership. Mr. Van Lear said the network is seeking two or three more owners. These would bring the number of stakeholders to eight or nine, assuming National City and Mellon are approved as expected.
He said EPS is looking for owners that could bring EPS new processing capabilities or a significant amount of new processing business.
"The primary thrust for our expansion will be acquisition, or joint ventures where they make sense," said John Beran, president and chief executive of EPS' Money Access Service Inc. unit.
The company is not likely to grow beyond nine owners, because "after that, you begin to look like an association, which is something we want to avoid," Mr. Van Lear said.
Observers note that EPS still has some merger-related challenges ahead of it. As Mr. Van Lear admits, the company is still in the throes of molding a single corporate identity from the parts that initially made up EPS.
In addition, it still faces occasional technical problems from the consolidation of network platforms, observers said.
However, most expect EPS to place these obstacles behind it in the next few years, which may renew the network's reputation as a unique organization.
"Whether they can be all the things they want to be remains to be determined by the marketplace," said Richard Speer, chairman of Speer & Associates in Atlanta.
"But the answer about whether or not EPS is successful or. not successful lies in the second half of this decade, not in 1994."
