It takes a subtle shift in perception to appreciate the formula for high-tech automated teller machine success at Bay Banks Inc. of Boston. Don't focus on the ATM, say Bay Banks executives. Focus on the card.

"The ATM is just one medium for conveying services. The card is the way you access the banking - and nonbanking - services," said Lindsey C. Lawrence, president of BayBanks Systems Inc., the technology arm of the $10 billion-asset bank holding company.

The trick, according to 6,317-employee BayBanks, is to make sure there are plenty of services available to the customer. And that's exactly what BayBanks has done. First, there are the services gained through the nearly 1,000 ATMs in BayBanks' proprietary X-Press 24 network. A sampling: Customers can use the card to get interest rate and personalized financial information, apply for credit, track account activity, learn more about BayBanks' services, and bank by telephone at specially equipped machines. In a new wrinkle in the ATM features game, customers can also purchase postage stamps at selected sites. Also, in addition to the traditional "fast cash" withdrawal, customers can program the bank - through any ATM - to give them "custom cash," a custom amount with the same speed as fast cash. The bank also expects that its new, proprietary BayBanks family of mutual funds, will someday be accessible through the card.

Then there are the non-X-Press 24 services attached to the card: the point-of-sale debit capabilities at more than 5,000 Mobil gas stations nationwide and at 195 supermarkets in the Boston area. And there's the MasterCard debit product called X-Press Check, which lets customers debit their checking accounts rather than use a credit line at about 10 million MasterCard merchants worldwide.

Holders of BayBanks ATM cards can also access more than 7,000 NYCE and Cirrus ATMs nationwide.

"We are the card bank in this area," said Ms. Lawrence. "It's wrapped up in our identity. It's our essence, our core."

Focusing on such a niche as a way to separate itself from rivals has been a smart move for BayBanks, said Greg Schmergel, vice president of the Tower Group, a consulting firm in Dover, Mass.

"It gives them a fine point in the marketplace, and it's better than trying to be good at everything, as many other banks try to do," he said. "They realize that by using technology to enhance their product, they could focus on profit, not price."

And the move has served BayBanks well in market share. In 1992, its total market penetration, as a percentage of households that have at least one account with BayBanks, was 31.2% in eastern Massachusetts, its primary market, and 25.7% statewide. In one county in Boston's suburbs, share bulged to more than 41%. And BayBanks was named in a survey it conducted as the primary bank for 21% of the households in its primary market.

"BayBanks grew market share steadily through the past decade," said Ms. Lawrence. "We give a lot of credit for that to the card."

As market share has grown, so has use of the BayBanks card. More than one million customers, or about 90% of BayBanks' retail base, are cardholders, said Ms. Lawrence.

"And nearly 80% of our cardholders are active," she said. "In a recent survey, Massachusetts customers averaged 7.5 ATM visits per month. For us, the average is 9.8 visits per month."

It all adds up to a reported switch volume of more than 11 million transactions, including telephone banking and POS transactions along with ATM processing. Seventy-four percent of this volume is attributable to BayBanks' cardholder transactions, while the rest is credited to customers at the 88 banks participating as BayBanks' franchisees in its network.

It's a smooth marriage of marketing and technology, and like all smooth marriages, it's taken strategy and hard work.

"It is one of the few banks that incorporates technology into its marketing, and they emphasize the underlying technology, not just that it's better or faster for the customer," said Mr. Schmergel. "But they can do that because they have very advanced technology behind their marketing."

"We are market driven," added Ms. Lawrence. "We have to be. We're a mass-market bank. We have to understand our customer. That's why it's imperative that we do market research before we innovate features, and then take the research seriously."

So seriously does BayBanks take its research that Ms. Lawrence and other top-level executives sit in on customer focus groups, rather than leaving that task to junior staffers.

And while the research orientation has given BayBanks a pretty good track record, symbolized most recently by the success of the postage stamp and custom cash features, it has occasionally led them astray.

One such snafu, aimed at businesses that use the bank's card, was an attempt to wed ATMs to the night depository. It was intended to give the business depositor an immediate record and receipt of the transaction.

"Research said it would work," Ms. Lawrence said. "But we never got the usage on it we expected."

Nevertheless, the bank continues to look for ways to differentiate itself and give more functionality to the card. Current possibilities under investigation include dispensing event tickets through ATMs. Using ATMs to dispense foreign currencies is another option.

What's making any of this possible is new technology. Right now, there are two levels of technology, Ms. Lawrence said. BayBanks' newest ATMs - made by InterBold, a joint venture of Diebold Inc. and International Business Machines Corp. - feature many canisters that offer different capabilities such as postage stamp or foreign currency dispensing.

BayBanks leads New England in ATM machines, tapping into airports, colleges, universities, strip malls, and stand-alone sites. Such off-premises machines account for about half of the ATMs in the network. The number will continue to grow, as BayBanks extends into superstores and other high-volume retail centers throughout the region.

"We aim to have an ATM wherever there is a cluster of people," said Ms. Lawrence.

Although BayBanks' ATM operation is way out of scale with its asset size, Ms. Lawrence considers it a plus because it offers a chance to capitalize on the cost reduction that only a large scale operation can create.

For example, the company discontinued its arrangement with an outside maintenance service and decided to perform the functions itself.

"We could do this because we have a ready supply of technical expertise in the Boston area, and our ATMs are densely packed in the area," said Ms. Lawrence.

BayBanks' ATM banking operation is a profit center, according to Ms. Lawrence, though she declined to quantify the profit.

"As we added more features to the card, we ensured profit by moving our prices up," said Ms. Lawrence. "Again, we checked this out with our customers in focus groups. They said okay."

Fees to the bank range from 15 cents that some customers pay for on-line X-Press 24 POS transactions, to 25 cents for a postage stamp purchase, to 50 cents for each use of the Account Update feature.

It's a volume game, said Ms. Lawrence, and volume is driven by marketing.

"Think of us as a company whose management had very keen marketing instincts," she said. "In banking, there are very few ways to make yourself different from your competitors. When we set out to market our card, we found tremendous customer acceptance. We capitalized on that acceptance. We figured that new technology translated into new service, and this was an opportunity to differentiate ourselves from others."

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