Cash Station's POS Plan Eliminates Role for Banks

Cash Station, the Chicago-based automated teller machine network, announced that by early next year it will market point-of-sale debit services directly to retailers, cutting out banks as middlemen.

Cash Station is the first regional network to say that all its initial marketing will be direct, bypassing banks. It will be the second to put primary emphasis on contracts with retailers.

Most networks leave marketing of POS debit services up to their member banks. Cash Station officials said its decision reflects the facts that few banks offer merchant processing services and that banks have not marketed debit services aggressively.

Balancing Different Needs

"We have to serve the needs of 420 institutions, the vast majority of which are not in the processing business," said Stephen S. Cole, president of Chicago-based Cash Station. "We had to balance their needs against the needs of the processing banks."

The organization has earmarked a large sum -- "in the region of seven figures," Mr. Cole said -- for television ads.

Yankee24, a New England-based network, markets directly and allows banks to market in the debit program it launched in February. Older debit programs run by networks such as Pulse and Star rely on their member banks to market the services; New York Cash Exchange markets both through member banks and through the network.

Cash Station plans to market initially to seven major retailers, each of which would install its own switching equipment. Once the service has achieved a high volume of point-of-sale transactions, banks also will be allowed to market transactions.

"The key is that for all of the members' benefit, it is important for us to reach a critical mass" of transactions, said Thomas Tremain, vice president of electronic marketing for First National Bank of Chicago a Cash Station member. First Chicago sold its merchant processing business to Citicorp in 1989.

A Late Starter

Cash Station will be the last major metropolitan network to offer point of sale services. The delay has allowed it to avoid the mistakes that other networks have already made, Mr. Cole said.

"One of the reasons debit POS has not moved as aggressively as it could have is that banks did not take an active role in signing retailers up," said Richard P. Yanak, president of New England Network Inc., based in Wallingford, Conn., which operates Yankee24.

Most networks' rules have kept them from direct marketing, said Stephen S. Cole, president of Cash Station. "But many would prefer to do that, and they would be more successful if they had the same latitude" that Cash Station will have.

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