Bankers would do well to remember the history of the Swiss Army knife as they plan long-term strategies for automated teller machines.
In the beginning there was the simple pocketknife.
Then along came the Swiss Army knife - with a corkscrew, toothpick, tweezers, scissors, can opener, and bottle opener as part of the standard package - and pocketknives were forever transformed.
Similarly, the first ATMs were little more than cash dispensers. Today, ATMs are used to purchase mutual funds, apply for loans, or pay a credit card bill.
Electronic-banking pundits say there is no good reason why ATMs need only provide banking products and services.
Indeed, there is one company, Electronic Data Systems Corp., that has had great success harnessing ATM technology to distribute other companies' products.
The General Motors Corp. subsidiary offers stamps, travelers checks, and airline tickets through partnerships with banks and through its own network of more than 5,000 ATMs. EDS, based in Plano, Tex., has plans to provide event tickets, class schedules for college students, and many other printed documents through ATMs.
"As a major deployer (of ATMs), we get contacted ourselves almost weekly by an industry or a service provider who would like to tap into the delivery system that the banking community has created," said Dale Dentlinger, vice president of retail terminal services in the electronic funds transfer group within EDS' electronic commerce division, based in Morris Plains, N.J.
EDS' strategy has the industry in an uproar. There is fractious debate over whether EDS' success is good for banks.
Take, for example, these two opposing viewpoints:
"EDS says that soon half of its ATMs will be dispensing noncash media," said Steven A. Rathgaber, senior vice president in charge of sales and production for Infinet Payment Services Inc., the Hackensack, N.J.-based company that operates the NYCE regional electronic banking network.
"Once again, we are confronted with an example of an organization that is not a financial institution making more money than the banks seem capable of making," said Mr. Rathgaber, in a presentation at NYCE's annual member meeting earlier this year. "I want you to be angry about that."
"I know it is not a widely held view, but I have found EDS to be fully committed to the banks' best interests," countered Steve Cole, chief executive officer of Cash Station Inc., the Chicago-based regional network that recently signed a five-year switching services contract with EDS.
EDS officials, naturally, side with the latter opinion, saying they are very much the friend - not foe - of banks.
"Customers want to use bank delivery channels to access a myriad of products and services - not just banking, but also bill payments, transportation tickets, event tickets, shopping, stocks and bonds, and access to the Internet," said Neil R. Marcous, vice president and general manager of EDS' electronic funds transfer business. "The banker is thus providing the ramps to the information highway.
"But constructing the ramp can be an expensive proposition," he added, "so that's where EDS comes in."
To ensure that EDS is always an industry leader, Mr. Marcous has created an atmosphere in which employees are comfortable voicing their ideas - no matter how off-the-wall they may be.
"Neil has surrounded himself with brilliant, creative people," said Cash Station's Mr. Cole. "If you could bottle this energy, everybody would want it."
The rules of the brainstorming game at EDS are simple: Anybody can propose any idea - especially if the idea concerns delivering preprinted documents of value (cash is the best example) or documents that can be printed on the spot.
One example of the latter, offered up by Mr. Marcous, is a fishing license. A New Jersey resident, planning a two-day fishing trip in upstate New York could simply drive to his favorite fishing hole, pop his ATM card into a nearby unit, and get, on-the-spot, a temporary license. The fee would be deducted from his checking account and electronically wired to the appropriate government agency.
"These are the kinds of developments that happen only through a company that touches every industry," said Mr. Marcous. "The policy in EDS is that any technology development in any one division is then available to any other unit, so we closely track what our government division is doing, and our transportation division, and our other divisions."
The electronic funds transfer group also boasts a product development advisory committee, with industry practitioners - bankers and network executives - consulting with Mr. Marcous and his staff on which of their many ideas are of most interest.
EDS' electronic funds transfer group alone spends $6 million to $8 million each year on research and development.
"We have off-site meetings - we take all day - to just talk about how we can keep people from waiting on lines," said Mr. Marcous. "Right now, we have about 100 different plans."
"We have a document - it's eight single-spaced typed pages - of new ideas or projects to be developed," agreed Robert J. Lang, EDS' quality assurance manager. "Airline tickets and event tickets are just the tip of the iceberg."
The company also uses its own huge network of ATMs as a laboratory to test consumer receptivity to different products and services.
EDS is the second-largest deployer of ATMs in the country, trailing BankAmerica Corp. By its own projections, EDS will surpass the California bank by the end of this summer.
Last fall, EDS won the lucrative contract to handle core transaction switching services for Cash Station, thus adding that network to the others - New England's Transaxion Corp. is just one - for which it performs switching.
The company processes approximately two million transactions per day through its Rochelle Park, N.J., data center.
Earlier this year, EDS entered into an agreement with the Exchange network to form a new company, which will be owned equally by the two organizations.
Because the two companies are currently undergoing the due-diligence process, officials are deliberately sketchy with details regarding the mission and organization of the new concern.
Industry watchers have suggested that the two companies plan to pool their resources to form a national network. Officials from EDS and Exchange neither confirm nor deny such plans.
"We believe that to compete over the next 10 years with companies like Visa, MasterCard, First Data, or Deluxe, it cannot be done from a regional network basis," said Tom Bass, president of the Exchange, Bellevue, Wash. "We have to build a good product mix, which is exactly what this joint venture will be doing. We want to give the banks a voice, because the bottom line is that they've got to be able to compete."
Circumstantial evidence certainly supports the contention that EDS is interesting in building a national network.
The company has been working on a project for well over a year called the "electronic on-line network," which will consist of six to eight processing locations interconnected and functioning like a single data center. The locations will be spread over time zones across the country, allowing EDS to spread the workload and avoid possible overloading of the circuits during peak periods.
"What we are talking about is building the backbone for what is not a money delivery system but a product distribution system," said Mr. Marcous. "What we are talking about are revolutionary new products that will bring customers back to the bank. What we are talking about is a way for banks not to make pennies of revenue, but potentially dollars of revenue.
"It's important for us to get our message to banks that, in partnership with us, they can stay in the loop."
