In an effort to improve their chances of surviving the consolidation of the electronic funds transfer industry, two secondtier automated teller machine networks have agreed to merge.
EFT Illinois Inc., based in Rockford, Ill., and Access 24, operated by Computer Services Inc. in Valparaiso, Ind., agreed last week to combine their ATMs into a single, not-for-profit network.
"The two organizations can achieve better economies of scale by merging," said Mark Horwedel, executive director of EFT Illinois. "There is also the feeling that [larger neworks] might target this area of the country for new members, and our two organizations feel the bigger we are, the better off we are."
According to The Nilson Report, a newsletter based in Oxnard, Calif., EFT Illinois is the nation's 26th-largest ATM network and Access 24 is ranked 51st.
The still-unnamed network will operate primarily in Indiana and Illinois, but Computer Services will also push to expand membership into nearby states such as Ohio, Michigan, West Virginia, and Kentucky.
Penetration into other states will be a highly competitive undertaking. One of the most influential networks in the country - Delaware-based Electronic Payment Services Inc., which operates under the MAC logo - has already targeted the Midwest region for its own membership drive.
In addition, 15 of the region's largest financial institutions are in the process of forming a venture similar to EPS that could further intensify competition in the area.
But the EFT Illinois-Access 24 tandem may well be able to attract new members from the large pool of small banks in the Midwest, experts said.
The reason for this is that, unlike the giant networks vying for dominance in the region, the new network will allow all members, not just equity owners, to have a say in the strategic direction of the network.
This is a function of the new network's not-for-profit structure.
In addition, EFT Illinois' Mr. Horwedel believes the widespread acceptance of the national point of sale programs - Visa's Interlink and MasterCard's Maestro - are only a few years away.
"I don't think it's going to take nearly as long for [national point of sale] to come along as it did for Cirrus and Plus on the ATM side," he said.
Links to National POS
This runs counter to the opinions of many electronic banking experts who feel that regional POS marks will dominate many areas of the eastern United States, including Chicago and New York, for at least the next decade.
EFT Illinois already has gateway links to the national POS programs, as well as to Visa and MasterCard's national ATM networks, Plus and Cirrus.
The combination of EFT Illinois and Access 24 will result in a network of about 1,000 ATMs that generate about 28 million interchange transactions, according to The Nilson Report.
Interchange transactions are those that result from a bank customer using an ATM that is not owned by the financial institution that issued the customer's ATM card.
The merger is expected to begin in November.