Citicorp, signaling the end of its go-it-alone automated teller machine strategy, is said to be in the final stages of negotiations about taking an ownership position in the NYCE network.
Sources close to the talks also said that Mellon Bank Corp. is discussing taking a stake in NYCE. Addition of the Pittsburgh-based company would give the network a market in-road against MAC, a rival network jointly owned by Core-States Financial Corp., Banc One Corp., PNC Financial Corp., and Society Corp.
But a Mellon deal pales in comparison to the prospect of Citicorp and NYCE finally getting together after years of sometimes stormy courtship. NYCE was established in 1984 by several New York banks to help combat Citi's early ATM lead.
Falling One by One
Several financial institutions including Citicorp, NBD Bancorp in Detroit, and San Francisco-based BankAmerica Corp. have tried to operate their ATM businesses independently of regional shared networks.
But, one by one, these banks have caved in to sharing their ATMs: BankAmerica moved to California's Star network in 1988, NBD to Michigan's Magic Line system earlier this year. And Citi recently began joining regional networks outside New York metropolitan area.
"We're talking about the death of the Lone Ranger if Citi goes," to NYCE, said Richard Speer, chairman of Speer and Associates, an Atlanta-based electronic banking consultancy.
"The sticking point right now, as I understand it, is the amount of equity Citi would have and whether the New York banks will extract a pound of flesh in exchange for it."
NYCE officials confirmed that the network has had ongoing negotiations with Citicorp over the past few years, but they declined to comment on whether those talks are close to bearing fruit. They, also declined to comment on the Mellon matter.
An Inside Track for NYCE
Citicorp and Mellon officials also declined to comment.
Both Citicorp and Mellon would add significant numbers of ATMs to NYCE, which has been seeking to expand the geographic area it serves beyond New York and New England.
But more significant, some experts say, is that the two banks' credit card merchant processing connections would instantly give NYCE an inside track to a universe of retail locations that could ensure the network a spot among the top players in the debit card point-of-sale business in the coming years.
NYCE hopes the banks' merchant customers, who already have point-of-sale terminals for credit cards. can be easily persuaded to accept debit cards.
Citi and Mellon would join the seven owners of Hackensack, N.J.-based New York Switch Corp., which runs NYCE: Bank of New York Co., Baybanks Inc., Chase Manhattan Corp., Chemical Banking Corp., Fleet Financial Group, Marine Midland Banks Inc., and National Westminster Bank USA.
Though many of these banks compete with Citicorp for business within New York City, sources said the NYCE owners feel the benefits of having it join the network now outweigh the intramarket competitive considerations.
Another of NYCE's objectives in bringing Citicorp on board is to keep the bank's nearly 2,000 ATMs out of the hands of NYCE competitors, such as MAC, who are anxious to gain a foothold in the New York market, sources said.
On the other hand, Citi is drawn by a need to extend debit point-of-sale capabilities to its retail banking customers. NYCE, which recently launched a television ad campaign promoting the use of the ATM card at supermarkets and Mobil gas stations, is the clear POS leader in the New York area, and likely will remain so as that business matures.
Experts said a Citicorp move to NYCE would probably not significantly increase the NYCE members earn from so-called "foreign" transactions -when a bank pays a fee for a cardholder to use another bank's cash machine. Because most NYCE banks and Citicorp already belong to the Cirrus national ATM network, many Citibank cardholders have de facto use of NYCE cash machines.
However, NYCE officials admit that landing Citicorp would be a tremendous boost to the network's stature. In addition to being the nation's largest financial institution, Citicorp is also widely recognized as the bank that established a market for automated teller machines when it installed hundreds of its own custom-designed machines in the 1970s and early 1980s.
Citicorp is also the only bank that has used the ATM to increase substantially its retail market share, consultants said.
But even if it can obtain Citi's clout, NYCE has other needs that it hopes Pittsburgh-based Mellon Bank Corp. can fill.
Specifically, the network is slowly being cornered in the, northeast by expanding networks to its west and south.
Adding Mellon as an owner would give NYCE about 600 ATMs in MAC's Pennsylvania backyard. It would also bring the network some additional processing capabilities, as Mellon provides ATM outsourcing services to many banks.
"Mellon would be NYCE's window to the west," said Sean Kennedy, president of the Electronic Funds Transfer Association, based in Reston, Va. "If NYCE gets a, foothold there, it opens up a whole range of opportunity in the Midwest."
The Midwest is generally recognized as the region where the most merger activity among regional networks will take place in the coming months, according to banking consultants.Joining the Club?Numberof ATMs as of 6/30/92 Equity owners of the NYCE automated teller machine networkBayBanks, Inc. 1,004ChemicalBanking Corp. 954Fleet FinancialGroup 819Chase ManhattanCorp. 618National WestminsterBancorp 320Marine MidlandBank Inc. 309Bank of New YorkCorp. 146 Possible ownersCiticorp 1,900Mellon Bank Corp. 600Source:American Banker!! END TABLE