Taking a cue from the consolidating banking industry, two regional payments associations have signed a definitive agreement to merge.

The organizations, American Clearing House Association of Phoenix and Rocky Mountain Automated Clearing House Association of Denver, cover neighboring regions under the umbrella of the National Automated Clearing House Association in Herndon, Va.

Officials said a merger would lessen their dependence on funding from larger dues-paying banks. Although each entity's membership level has remained constant in recent years, consolidation among banks can substantially shrink the membership pool and available financial support, potentially destabilizing operations.

"We want to increase our service levels and offerings, yet trying to maintain the same resource levels is very difficult considering the direction the industry is going," said Holly Merrill, president and chief executive officer of the American Clearing House Association.

Pending final approvals of the merger, "we can expand our service offerings into a larger geographic territory as well as reduce the dependency on the large members as those members start to merge with each other," she said.

The merged association -- its new name has not been determined -- would operate under a not-for-profit charter. The deal, which still requires final approval from each organization's board of directors and members, is slated to close Dec. 31.

Mergers have become common among regional payments associations, in both the automated clearing house and automated teller machine businesses. As the largest banks have gotten larger through mergers and extended their geographical coverage, their need to support multiple groups performing similar functions has diminished.

Among the ACH associations, Eastpay Inc. of Richmond, Va., resulted from the combination of three: the Virginias and North Carolina Automated Clearing Houses, which merged in 1996, and the addition of Payments Systems Network of Maitland, Fla., this year.

The pending merger in San Francisco of Bankers Clearing House, one of the oldest check clearing houses in the nation, and Western Payments Alliance, the California-based automated clearing house association, would create Servco.

The National ACH Association, or Nacha, is an association of associations, and has therefore experienced its own membership decline. In 1988, Nacha was comprised of 31 regional and local ACH groups and 11 others owned by single banks. Including the latest merger announcement, those numbers would be reduced to 24 and 9, respectively.

Norman Robinson, president of Eastpay, said Nacha has responded to the consolidation trend by expanding into new areas. For instance, he said, it has turned its rules-making expertise to areas such as electronic benefits transfer, electronic checks, and digital certificates for Internet commerce.

"It is a trend that is unavoidable," Mr. Robinson said. "I think both Nacha and the regional associations need to prepare themselves for further losses of income and revenues."

American Clearing House Association, formerly the Arizona Clearing House, represents its 135 financial and corporate members in the rule-making process at the national level. It also clears and settles 33 million checks per month, and is one of three private-sector ACH operators that compete against the Federal Reserve System. The Rocky Mountain ACH Association, which has only two employees, provides educational and advocacy services to 245 member institutions in Colorado, northern New Mexico, and Wyoming.

Noting that the merging entities have only seven members in common, Jack Albrectson, executive director of the Rocky Mountain group, said the two associations offer complementary services. As a superregional body, it could provide enhanced services to members including payment-related services that go beyond the ACH system, he said.

"We have got a lot of new banks starting up in our region with many needs that we can meet," he added.

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