First Union Corp.'s pending acquisition of CoreStates Financial Corp. promises to shake up the ATM network structure along the East Coast.
First Union, the seventh-largest deployer of automated teller machines and already a 30% owner of the southeastern network powerhouse Honor Technologies Inc., will inherit CoreStates' 20% position in Electronic Payment Services Inc. of Wilmington, Del.
EPS owns MAC, one of the pioneering and most successful of the regional networks, which was started by CoreStates and was wholly owned by the Philadelphia banking company until a spinoff to several other superregionals in 1992.
MAC has been facing increasingly stiff competition both for its processing services and for the loyalty of banks in its region that also might choose Honor or the NYCE network that blankets the Northeast.
Now MAC will have to contend with an owner that is likely to make waves because it will want to "rationalize" its investments. First Union's spread outside of its North Carolina base, like that of Charlotte-based rival NationsBank Corp., was a factor in the decision last year to merge and consolidate the neighboring Most and Honor networks.
EPS processes more than a billion transactions a year and has perennially handled more central switching volume than any other shared network. Much of that business comes from its five shareholders: CoreStates, Banc One Corp., KeyCorp, National City Corp., and PNC Bank Corp.
First Union, with an extensive in-house ATM operation, could steer even more ATM-driving business to EPS.
But consultant and former ATM network executive Michael A. Strada, president of Atlanta-based Electronic Commerce Strategies Inc., said First Union's strong technology orientation could lead it "to distance itself from participation with EPS."
First Union also will surely address questions about its membership status in multiple networks.
"The real decision might not be on the brand side but may be on the processing side as they start to categorize the decisions they need to make," said Dennis F. Lynch, president and chief executive officer of NYCE Corp., to which First Union also belongs. "Each time there is a merger there is an opportunity for benefit and an opportunity for risk."
When BankBoston Corp. acquired BayBanks Inc. in 1996, it moved its ATM processing in-house from NYCE. NationsBank, after buying Barnett Banks Inc. of Florida, plans to take the processing of Barnett's 1,200 ATMs in-house and away from Honor Technologies.
Industry observers said First Union may balk at farming out its 2,400- machine operation to a third party such as EPS. The bank might want to take over CoreStates' 800 ATMs.
"The other four banks that own EPS are going to be wrestling with an 800-pound gorilla," said former EPS employee Peter J. Quadagno, president of Quadagno and Associates Inc., West Chester, Pa.
David Lipkin, an electronic banking lawyer at Drinker Biddle & Reath in Philadelphia, said cost will be paramount in whatever decision First Union makes. "The other factor will be how much they want to control their own shop," he said.