With the ranks of regional automated teller machine networks thinning like hair on the head of a middle-aged man, their bank owners, too, are confronting a mid-life crisis.

In the mid-1980s, more than 100 shared networks peacefully coexisted in adjacent markets.

But that youthful fraternity is giving way amid a more competitive environment in which the industry's largest and wealthiest ATM systems satisfy their hunger for business beyond their traditional home turf by buying or merging with smaller networks.

Fully 20% of the nation's shared networks have been acquired or forced out of business in the last two years, according to The Nilson Report. And as consolidation takes hold in electronic funds transfer, or EFT, it remains unclear whether electronic banking will be led by the financial institutions that started it or by the powerful nonbank companies that have recently entered the business.

Banks in Driver's Seat

By virtue of their ownership of most of the major regional networks, bankers clearly direct the EFT industry at present. But experts feel that control could soon be wrested from the banking industry by the likes of Electronic Data Systems Corp. and Transaction Processing Inc., a start-up company headed by Bipin Shah, former technology chief at Mellon Bank Corp. and CoreStates Financial Corp.

"Look at EDS and guys like Bipin, and you'll see a lot of nonbank money waiting to be spent," said A. Edward Gough, president of the Money Station network, based in Columbus, Ohio. "That money's going to create a lot of headaches for bankers over the next few years."

To be more pointed, Mr. Gough and the operators of other smaller networks are concerned that the nonbanks will buy large pieces of the EFT business out from under the nation's financial institutions.

86 |Survivors'

The United States now has 86 regional electronic funds transfer networks, nearly an of which are jointly owned by groups of financial institutions. At least two-thirds of these networks are expected to be acquired or merged with other networks.

Taken as a group, these smaller networks are repulsed by the idea of participating in a Iarge network scheme. The small and midsized banks that own them harbor justifiable fears that to merge with one of the big boys - such as NYCE or the Star System - would be tantamount to abdicating their say in directing their business.

However, it is clear to most observers that the smaller networks cannot continue in their present form. And given the choice between leaving the EFT business empty-handed and selling out to the highest bidder, even the least savvy businessman will take the money.

In a sellers' market such as this, the deep pockets of the nonbanking companies have aroused concern in many bank-owned networks.

Seeing a Profound Threat

"The new entrants into this business are going to have & profound effect on the finances behind the industry consolidation, and many of those effects are clearly not going to be in our best interest," said David A. Huemer. He is the newly appointed president and chief executive of New York Switch Corp., which owns the NYCE network.

Since the nonbank networks are eager to establish a foothold, bank-owned networks fear that the average price to acquire a smaller network will go through the roof within a few years - and out of reach of the bank-owned groups.

In places like the Midwest, which boasts more small, independent networks than any other region, this could mean that banks would lose control of an entire region.

"We're certainly not going to reveal any of our specific [acquisition] targets," said Mr. Shah, who heads up Philadelphia-based Transaction Processing. "But I assure you that, unless you've got a lot of capital, it's going to be very tough to survive in the next few years."

Banks on the Move

Obviously, the bank-owned networks are not sitting still for this.

CoreStates, Banc One Corp., PNC Financial Corp., and Society Corp. decided in July to combine their automated teller machine and point-of-sale businesses in the nation's largest electronic banking company, Electronic Payment Services Inc.

And the rest of the nation's book-owned networks are making similar moves, though on a smaller scale. '

For instance, NYCE, the dominant network in the New York area, has split the duties of its head office between Mr. Heumer and Alan Pohlman, the network's chief operating officer, so that Mr. Huemer can concentrate on the network's strategic positioning.

Big Banks' Self-Interest

While these networks gird themselves for a more competitive era, they feel that at least one element of the present industry structure benefits them.

Much of the EFT consolidation so far has been driven by financial institutions that have large interstate retail presences.

Many of these institutions believe that belonging to a different EFT network for each region in which they maintain a presence is unwieldy and expensive, and they are increasingly willing to use the clout of their transaction volume to spur mergers.

In this respect, financial institutions retain power to ensure that the power to guide the EFT industry remains with banks.

"Many of the networks are not self-motivated to consolidate, but the large multistate banks are demanding to see the benefits of improved efficiencies," said Stephen S. Cole, president of Cash Station in Chicago. "To that extent at least, the banks will wield considerable clout for some time to come. How that will be used remains to be seen."

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