Electronic Payment Services Inc. may be losing one of its owners, but at the same time it is gaining ground in important reaches of its empire.

That is the way Richard Garman views the effects of recent bank merger activity on the Wilmington, Del.-based networking company, operator of the MAC automated teller machines and one of the biggest of all transaction processing companies.

Mr. Garman, EPS' chief executive officer for the past two years, took in stride the recent announcement that CoreStates Financial Corp., creator of the MAC network, would be acquired by First Union Corp. of Charlotte, N.C.

While others in the ATM industry gossiped about what First Union might do with its 20% of EPS-it will be an equal partner with Banc One Corp., KeyCorp, National City Corp., PNC Bank Corp.-Mr. Garman said he had no reason to fear the consequences.

Some observers have speculated that First Union might want to consolidate its influence in EPS with other ownership positions in Honor Technologies of Florida and NYCE of New Jersey. But Mr. Garman suggested First Union is just as likely to prove a boon.

Even if it does not, two other EPS owners recently announced acquisitions that promise to make MAC bigger-Banc One through First Commerce Corp. in Louisiana and National City through First of America Bank Corp. in Michigan.

"The mergers dramatically enhance our market share in both those regions," Mr. Garman said. "We are seeing a lot of sales activity in Michigan, Indiana, and Illinois," where the Magic Line and Cash Station networks are strong.

"We also think Louisiana should be very good for us." The Pulse network of Houston is the local leader by virtue of its acquisition of Gulfnet.

EPS' pending new owner, First Union, "has always been proactive in this business," Mr. Garman added in an interview during the Bank Administration Institute's retail delivery conference in New Orleans. "We think there is an opportunity for everybody to trade up."

In other words, First Union could end up steering more business to EPS than CoreStates could. First Union also has some decisions to make concerning its 32%-owned affiliate Nova Information Services Inc. of Atlanta, which overlaps in the merchant processing business with EPS and its Buypass Corp. subsidiary.

First Union has not begun to deal with these issues, the banking company's chairman, Edward E. Crutchfield, indicated.

Asked after his keynote speech Wednesday what he would do with the MAC stake on top of the previously owned 30% of Honor, Mr. Crutchfield said, "I don't know." He said the question had not yet been mulled over by his "brain trust," which presumably had other priorities since the CoreStates deal was announced last month.

The BAI conference participant who asked the question was Richard J. Lyons, senior vice president of Comerica Bank of Detroit and a former executive of the Virginia-based Most network. Most was absorbed into Honor last year, in part because it made sense to superregional companies like First Union and NationsBank Corp. that participated in both networks.

Voicing a curiosity typical of people in the know about regional electronic banking ventures, Mr. Lyons later told a reporter that including its MAC stake, First Union could theoretically own "a bigger piece of the payment system than any other bank."

Mr. Lyons said he did not know how significant this fact would be, assuming such a consolidated ownership measure could be meaningfully calculated. But he added, "It's something to think about."

Mr. Garman said it is his belief that "trends are in our favor," including banks' continuing tendency to turn technology over to outsourcers and the outsourcers' imperative to increase the size and scope of their operations to gain efficiencies.

"Banks learn there is little ROE-return on effort-from driving their own ATMs," Mr. Garman said.

"There will be extreme consolidation in this business," he added. "A lot of people focus on the brand side, but it will be more pronounced on the processing side."

And under Mr. Garman, EPS has emphasized its processing prowess. He said the company, which operates the most active central ATM transaction switch in the industry, had "lost some focus" before he arrived but is now ahead of the targets set forth in a three-year plan.

He takes pride in the company's concentration on just three key areas: driving of ATMs and point of sale terminals, the gateway clearing business, and the regional switch operation. He contends banks that are burdened with hundreds of products and related strategic decisions will confidently rely on EPS for those few specialties.

Smart cards, a rage in some quarters and something that Mr. Garman says is inevitable, fell out of favor at EPS. In keeping with the narrow product set, EPS ended its ill-fated run at the business selling its system, once known as SmartCash, to Touch Technology International of Phoenix.

"We are an acquiring company," Mr. Garman said, referring to EPS' "acquiring" of transactions from electronic terminals for processing. "Smart cards are an issuing product. We were right on the market but wrong on the entry point."

He said EPS is in a position to learn from the experience and eventually will benefit from smart cards' conversion of cash and checks into still more electronic transactions, but the trendy technology didn't fit the mission.

"We are judicious and very focused," Mr. Garman said. "Some might say overly so. We say it is hard to get too focused."

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