Mellon Bank Corp. has agreed to buy an equity stake in Money Station Inc., the regional automated teller machine network based in Columbus, Ohio.
Both Mellon and the network described their deal, announced last week, as a way to increase volumes and achieve economies of scale.
Pittsburgh-based Mellon's 20% stake would make it an equal partner with four other Money Station owners. The companies did not reveal other details of their definitive agreement.
David L. Johns, manager of the Mellon Network Services processing arm, said the equity participation would help Mellon expand its business in western Pennsylvania and Ohio by offering clients better switching and ATM- driving fees.
"We're a transaction processor and we're looking for ways to get business in our own backyard," said Mr. Johns. "That is why we chose to have the Money Station as a network alternative."
The biggest ATM network name in the region is MAC, the venture of Electronic Payment Services of Delaware, which is the second-largest processor of electronic funds transfers, according to Faulkner & Gray's Card Industry Directory. Mellon ranks 10th.
Money Station is the 21st-largest regional network in total transactions. The deal would expand its service area and help it provide better switch and interchange rates to card issuers and acquirers, said Christopher S. Sontag, who became chief executive officer July 1.
As an equity owner, Mellon would join Ohio-based owners Huntington Bancshares, Fifth Third Bancorp, and Star Banc Corp., as well as Dollar Bank of Pittsburgh.
Mellon adds to Money Station's 5,168 ATMs its own 725 in Pennsylvania, Delaware, New Jersey, and Maryland.
The move is the latest in a series of developments that could make the processing market more competitive. Money Station said it covers 90% of ATMs in western Pennsylvania, giving banks in the region an alternative to MAC.
As a result of a 1994 consent decree with the Department of Justice, Electronic Payment Services canceled membership rules that required MAC network members to use EPS as their processor.
Also, in 1995, Mellon withdrew from an agreement to buy an equity stake in MAC, which would have given EPS the chance to drive Mellon terminals. Though Mellon is hoping to make inroads in EPS' processing market, for now it will continue to participate as a MAC member.
Alan P. Pohlman, executive vice president at Carmody & Bloom Inc., a consulting firm in Ridgewood, N.J., said Mellon's "objectives are furthered (if it) can offer access to Money Station to a bunch of financial institutions and do their processing for them."
But Mr. Pohlman also noted Mellon will face a challenge in luring away MAC members who are used to "one-stop shopping," obtaining both terminal- driving and switching services from one source.
Mellon's success will be determined in part by the extent to which Money Station's switching and Mellon's processing cost less than MAC is charging for the combined service, Mr. Pohlman added.
