THOMAS O. BENNION President and chief executive Southeast Switch Inc. Maitland, Fla. I AM A GREAT BELIEVER that the marketplace dictates what is needed and what isn't. I would have to say that in today's world, the marketplace is suggesting there is a need for both. That is borne out by the fact that just about every major bank in the United States belongs to a regional network. And several of the last holdouts have recently joined.
If you didn't have a regional network setup it would require the national systems to have a much greater presence throughout the country. Regional networks also sponsor a lot of their members in and supply an awful lot of connectivity for the national systems. A lot of regionals are structured differently that the nationals, meaning that the financial institutions are looking for something different, in the sense that a number of them are for profit and (run as) businesses.
I do think regional and national networks can be complementary, and I think they are. They also can be competitive. The marketplace is going to dictate what happens, and as long as there is a need there will be (both).
*** STEPHEN S. COLE Chief executive Cash Station Inc. Chicago I THINK THE ANSWER to the question is yes; that while there will be continuing consolidation as a reaction to consolidation in the banking industry, there will likely be, by the turn of the century, five or six major regionals that will be at the same time be both cooperating and competing with the nationals.
The raison d'etre for a regional, first and foremost, is local autonomy and control of the owner institutions. Each major geographic segment of the country has had historical peculiarities with regard to state legislation, consumer expectations, and density - or lack thereof - of market share of traditional financial institutions. And historically and prospectively, major financial institutions will look to regional organizations over whom they exert more control than they do the global companies to meet their needs. As you look at the future technologies like stored value and smart card, this represents a global technological revolution. Yet the consumer use will be the most local of all payment technologies ever. Therefore, financial institutions will insist that the technological design and the economics and the research and development prioritization be local and regional, versus global. However, regionals and their owner banks will still need the nationals to provide them out-of-market access. And the nationals ought to continue to be the network of second resort, not first resort. The industry keeps forgetting that the nationals and regionals are owned by the exact same people. And the owners of the nationals and regionals need to clearly articulate to what extent do the nationals and regionals cooperate versus compete. And the regionals' and nationals' management should not be answering that question. The answer should come from the ownership.
*** RICHARD P. YANAK, President and chief executive Infinet Payment Services Inc. Hackensack, N.J. THE ANSWER IS YES. The reasons I would offer for that are twofold. First of all, regional networks are designed to efficiently deliver service and provide local and regional support to the owning financial institutions within their respective primary markets.
The national networks fill a very important and also necessary need which deals with the interchange of transactions among and between regional networks as well as international transaction facilitating. And in those circumstances, the national networks neither have nor need to have the level of support that the regional networks must necessarily provide because the regional organization at the other end of the interchange transaction provides that.
*** DENNY D. DUMLER Chief executive Plus System Inc. Denver I THINK THERE IS an appropriate role for both the regional and the national debit programs. In my mind the regionals provide direct member coordination and localized access with customized processing solutions for the individual markets. On the one hand, the nationals provide the international brand acceptance and the switch between the regionals or members in other countries. So I think there is a cooperative spirit between the two that enhances delivery to more people at the most cost-effective rate. I think what we have seen in the past will likely continue: that the regionals have tended to merge and consolidate with one another to expand the reach that they have. And the national systems have expanded and merged to become international systems. And so clearly the range has expanded for both to make sure there is sufficient value and sufficient economies of scale. I would expect that will continue.
*** JOHN G. BASCOM President and chief executive Magic Line Inc. Dearborn, Mich. CERTAINLY. I THINK THEY FILL somewhat different roles. But the programming of both the nationals are regionals are evolving. The question exists as to whether the two of them are both going to be needed in the future.
Certainly, the opportunity is there for the nationals to take over more and more of the business as they increase their organizations and technology. The opportunity is similarly there for the regionals to displace some of the things the nationals are doing as they get more sophisticated in putting links between networks. There isn't any reason why one or another has to go away as long as the services being provided in the long run are complementary and create value at both the regional and the national levels.
On the other hand, I don't think that's a foregone conclusion either. It's possible, depending on the strategies the two sides pursue, for one to supplant the other.
*** ALAN POHLMAN Executive vice president Carmody & Bloom Inc. Ridgewood, N.J. THERE CONTINUES TO BE a role for both. The volumes of the nationals and the regionals, collectively, have continued to increase. But it's clear we are in an evolutionary mode that will almost certainly result in fewer regional networks. As a result, I would expect to see many regionals shift from being association-like entities to become more profit- oriented, processing companies.
Indeed, the many regionals' role has already shifted from essentially offering a branded switching product to placing more emphasis on products and services such as authorization processing, terminal driving, and plastic card services. Many are also likely to offer home banking.
The nationals provide a seamless national and international payment system, something that regionals by definition don't provide today. While nationals serve a wide geographic area, their service menu is not as deep as many of their regional counterparts. They do offer national retailers a single access point for POS as well. I think many factors will influence the pace and direction of regional network consolidation. In the meantime, there will continue to be a role for both. Some regionals may actually evolve into national entities.