Rising to the challenge of harnessing technology to lead community banks beyond 2000, the Independent Bankers Association of America plans to announce today the creation of an electronic funds transfer division.
The division -- to be launched by mid-1995 -- will operate as a separate entity.
Ultimately, it could become incorporated under the IBAA Community Banking Network, a wholly owned subsidiary of the Arlington, Va., association, which comprises IBAA Bancard Inc., IBAA Securities Inc., IBAA Mortgage Inc., and IBAA Financial Services Inc., and serves 2,900 banks.
"The challenge for community banks is being able to keep up with the technology without going broke," said Linda F. Echard, president and chief executive of IBAA Bancard.
"It takes a while for the price of technology to come down. For [community banks] to be on the cutting edge or pretty close to it, they really will have to somehow pool their resources and that's what we're hoping to do for them."
IBAA is searching for an executive with EFT and community banking experience to head its new division. And it will send out requests for proposals to Equifax Inc. and other national service providers to meet the EFT needs of a diverse group of community banks.
Among the possible bidders are Deluxe Data, Electronic Data Systems Corp., Star System Inc., Internet, and Fiserv's EFT division.
IBAA Bancard said it is launching the division to ensure that community banks have equitable access to national and regional automated teller machine networks and all available EFT services.
Some of IBAA Bancard's EFT products will be moved to the new division, including off-line and on-line debit, merchant debit point of sale, home banking, electronic data interchange, and smart cards.
Attorney General Janet Reno's speech in Orlando last February about the investigation of pricing practices of regional networks for the possible violation of antitrust law served as the impetus to launch an EFT division.
"That was sort of a wake-up call," Ms, Echard said, adding that the association had been discussing the possibility of creating an EFT division for some time.
"I guess it's a message to the networks that are servicing this industry: don't forget about the smaller institutions," said Alan Pohlman, a partner with Carmody & Bloom, Ridgewood, N.J. "They do play a significant role as a group, if not individually."
A number of community banks had been taking steps toward EFT, but because the group is so diverse, Ms. Echard said, it was difficult for the association to assess and meet their overall needs.
One problem community banks face is the instability in the regional ATM industry, Ms. Echard said. Community banks joined networks that later merged, and then had to rejoin the new network.
"We felt by taking this step we could begin to build some sort of stability and at least give community banks another option," she said.
The first thing the 1BAA wants to focus on is ATM driving and ATM card management, including card embossing, supporting regional and national marks.
Over time IBAA believes it can develop an ATM network for community banks, leveraging its membership in the Cirrus and Plus international networks.
More than anything, IBAA EFT will provide community bankers a single point of contact to assist with technical expertise.
"They're all doing separate things," Ms. Echard said. "There's no single entity out there helping them take advantage of their collective asset power and purchasing power. We think through the IBAA structure that can happen."
IBAA wants the new division to be accessible to all members whether they've chosen to be part of the credit card world or not.
But it will offer IBAA Bancard members some discount to recognize that they are already players in EFT.
The group has taken a leadership role, said David Ballweg, chairman of IBAA Bancard and president of the Community State Bank, Union Grove, Wis., "to ensure small community banks have long-term equitable access to the current and future EFT industry." IBAA Bancard's Success Story Number of cards 722 thousand 1.6 millionNumber of enrolled banks 814 1,506Cardholder sales volume $515 million $1.7 billionMerchant sales volume $282 million $905 millionSource: IBAA