Scrapping for closer combat with established electronic banking organizations, Cartel Network has won a second major trade association endorsement in its home state.

Cartel, the trade name of Integrated Delivery Technologies Corp., Buffalo, announced the signing last week of the Independent Bankers Association of New York State.

The trade group's 101 members, added to the 120 of the state Community Bankers Association, which signed on last May, give Cartel a bigger pool of potential participants and more clout in carrying its "independent network" message across the country.

At least one other regional association-the 115-member Community Bank League of New England, which has been especially vocal in its desire for alternatives to automated teller networks like MAC and NYCE-is said to be close to joining.

Joseph E. Wolfson, Cartel's founder, chairman, and chief executive officer, said that within two months as many as 680 financial institutions could be getting preferred access to Cartel through trade association actions in multiple states.

He said his strategy, centering on grocery retailers and smaller financial institutions, is getting more and more favorable response. Much of it is a backlash against major banks' surcharges on automated teller machine transactions, he said, though Cartel's stated desire to safeguard the interests of retailers and community banks predated the current wave of surcharging.

Surcharges-typically $1 or $2 imposed by an ATM owner on other banks' cardholders-"make pretty clear what the big banks' intentions are," said Mr. Wolfson. "They are telling cardholders to move their accounts so they won't have to pay the surcharges."

Cartel has been able to tap into that resentment, typified by the Community Bank League of New England's recent move to organize a surcharge- free alternative. Community bankers increasingly express a desire for lower-cost competitors that could help them undercut the pricing of the major ATM networks, which they perceive as big-bank-dominated.

John L. Pritchard, executive director of the New York independent banking group, made a point of noting that Cartel "is not owned or controlled by the large financial institutions with which (smaller banks) must compete daily in their primary market areas."

The trade group prefers free-market solutions to laws that might ban surcharges outright, and Mr. Pritchard said the Cartel framework fills the bill. "It can let us carve out a group of banks that don't want to surcharge each other," he said.

Cartel "saw a niche to be filled serving small and medium-sized institutions that are concerned about protecting their customer base," said Mariel O. Donath, president and chief executive officer of the state Community Bankers Association. "Cartel also does hand-holding that would not be available to smaller banks from the big networks."

"We provide a positive way for the smaller independent and community banks to control their destiny and give their customers added convenience," Mr. Wolfson said.

The network, which Mr. Wolfson began organizing in late 1994, is clearly gaining momentum and adherents below the banking market's top tier.

He bootstrapped Cartel by forging a strategic alliance in 1995 with Affiliated Computer Services Inc., the Dallas-based data processor and ATM network operator. In July 1996 he announced completion of an equity financing from William Blair & Co. of Chicago, one of many signs of investor interest in the transaction processing industry and a timely credibility boost for the Cartel approach.

Through Affiliated and various retailer arrangements across the country, Cartel can reach more than 10,000 electronic terminals, 4,770 ATMs, and 4,870 stores and other locations. The numbers are small compared to those of top-10 ATM and point of sale networks, but they are big enough to bring national attention to what Mr. Wolfson still affectionately regards as a "gnat" among giants.

Cartel's roster of financial institutions has grown steadily. Many are credit unions and savings banks in the upstate New York areas where Mr. Wolfson and his partner, president and chief operating officer Craig S. McIntyre, established their reputations in the 1970s and 1980s running the pioneering Metroteller banking network.

But Cartel's leverage comes less from individual institution signings than from the Affiliated alliance, acceptance deals it has made with retailers, and the allegiance of trade associations.

The company's retailer base, too, is in New York and the Northeast, led by the supermarket chains Price Chopper, Tops, and Wegmans. But some national leaders like Albertson's, Kroger, and Wal-Mart, will take Cartel cards in some states.

Just as Mr. Wolfson was closing his deal with Mr. Pritchard's group, Price Chopper agreed to extend Cartel into 18 Massachusetts stores and 13 in Vermont. Cartel also said that Stewart's of Saratoga Springs, N.Y., will be piloting ATMs in several of its stores, and that Tripi Foods, a Buffalo- based distribution company, had signed a marketing deal that could help Cartel reach up to 1,500 stores in 19 states.

Mr. McIntyre pointed out that food retailers also bristle at ATM surcharging.

"They are concerned about their customer counts," he said. "They, not the banks, get the complaints when customers discover they are being surcharged at a machine in the store-and then the customers go elsewhere."

"We see the retail chains being dictated to by the networks," Mr. Wolfson said. "They have the best locations and a right to a say" in pricing. "We think we can be their spokesman and serve all segments" of the retailing market.

Cartel's positioning to smaller financial institutions is equally populist: "We are the alternative network," Mr. Wolfson said. "We can give (members) the ability to aggregate transactions to get better pricing and better service."

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