Tyme to Take Over Switching for EFT Illinois

EFT Illinois, a regional electronic banking network, has agreed to turn its central switching functions over to Tyme, a neighboring network in the Midwest.

Electronic Data Systems Corp. had previously handled switching for EFTI. By Aug. 31, EFTI will be piggybacking on Tyme, which has its switch processing handled by M&I Data Services Inc.

"We will be using a switch processor that is directly owned by banking institutions, rather than one who is competing with banks," said Mark Horwedel, president of EFTI, Rockford, Ill.

EFTI and Tyme, ranked respectively as the 28th-largest and 21st-largest automated teller machine networks, also formed an alliance for product development, research, and joint promotions.

The two networks had put into place a reciprocal sharing arrangement of ATMs and point of sale terminals several years ago.

Alliances of this sort are being closely studied by second-tier networks like Tyme and EFTI. Continuing industry consolidation has these smaller networks teaming up to fend off larger potential acquirers.

"We do not view ourselves as a minnow," said James H. Martin, president of Tyme, which is headquartered in Brown Deer, Wis. "We are not positioning ourselves to be acquired by a bigger fish.

"We are interested solely in building value in the network by increasing the level of quality and reliability."

Once the EFTI switch volume moves to Tyme, the two organizations will have combined monthly switch transaction volume of more than 10 million.

"The only volume that counts is volume that generates fees, and that means switch volume," said Mr. Martin. "That's why this is such a good alliance for members of both networks."

The two networks, which operate in geographically adjacent areas, do not consider this alliance a precursor to a merger.

"We saw some significant opportunities in joint product development and working together to further expand cardholders' use of the debit cards," said Mr. Martin. "But the one thing that this is not is a merger. There is nothing in the agreement that suggests merger."

Besides joining up for processing, Tyme and EFTI also plan to work together on a home banking project and other new products.

The alliance "will position both networks to provide the best possible services for all members in the future," said Mr. Horwedel. "Instead of having the two organizations separately develop initiatives in off-line debit or stored value cards, we can team up, which benefits all of our members."

Tyme currently completes about 6.5 million switch transactions a month, including more than 460,000 POS transactions. Its 494 members operate about 1,500 ATMs and more than 3,100 POS terminals in Wisconsin, Minnesota, and Michigan's Upper Peninsula. It is in the process of converting from a nonprofit to a for-profit organization.

EFTI, which has 380 members located primarily in Illinois, Missouri, Kentucky, and Indiana, switches approximately 3.5 million transactions monthly. It operates 1,025 ATMs and 4,456 POS terminals.

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