Management Shuffle at CoreStates
CoreStates Financial Corp. announced Monday a major management restructuring of its electronic payments subsidiary intended to shore up the unit's profitability.
Business at the unit, once one of the fastest-growing areas of the bank, is leveling off. For the first time, volume on CoreStates' profitable Mac automated teller machine network will not grow this year, bank officials said.
As a result, CoreStates is scrambling to unify the marketing and technology strategy of the three businesses that make up the electronic funds transfer unit. Bipin C. Shah, who built the Mac business, resigned earlier this year.
Bid for Mac Was Rejected
The company's board of directors turned down an offer of $450 million for Mac from Mr. Shah and Gregory C. Dillett, the former chief financial officer who left the bank at the same time as Mr. Shah. The bank now feels some pressure to justify its decision and prove the unit is worth more than that.
At stake is one of the bank's most important franchises, which accounts for a significant portion of its fee-based income, estimated at 40% of its total earnings. The Electronic Payments Services division, or EPS, includes the Mac network, a debit card point-of-sale business, and a merchant transaction-processing business. The bank has not fully integrated several acquisitions, including the Atlanta-based Bypass POS network, into the overall operation.
According to the bank, monthly transaction volume over Mac is averaging 49.5 million in 1991, up only slightly from the 48.9 million average in 1990. Volume grew sharply in 1990, from 43.4 million transactions the previous year.
On Monday, the bank appointed Donald J. Gleason to head the teller-machine business, including sales, marketing, customer service, network services and systems, and product development. He will report to Douglas D. Anderson, executive vice president and head of payment services. As part of the restructuring, technology and operations departments will report directly to business units.
Eperience with Network
Most recently, Mr. Gleason was head of strategic planning for the electronic payments services unit at CoreStates. Before joining the bank, he headed CashStream, Mellon Bank's regional network of automated teller machines, which was acquired by CoreStates in 1988.
Mr. Gleason's job incorporates marketing responsibilities previously held by senior vice president Bonnie E. Hill. Ms. Hill was reassigned to the point-of-sale business, where she will head a strategic business initiatives group.
CoreStates officials said that in light of Mr. Shah's offer for EPS, the bank wants to convince the Wall Street community that it is committed to the fee-based business. "We periodically look at this business to see if it makes sense to spin it off or change its relationship to CoreStates' [other] business," said Gary Brooten, a spokesman for CoreStates.
CoreStates does not distinguish fees generated from its credit card and debit card transaction-processing businesses. The bank's fee-based revenue was $133.9 million in 1990, up from $112 million in 1989. The bank expects this revenue source to be higher in 1991, reporting fees for the first nine months of 1991 of $127 million.
The Mac regional ATM business is at a crossroads, analysts say. The only major network to be wholly owned by a single bank, Mac is known for highquality service, and has significant name-brand appeal. However, it has little room to grow in Pennsylvania, and in a troubled banking environment, other banks have wondered why they should pay fees to a powerful rival.
Criticism has focused on Mac's relatively restrictive rules, which prohibit primary members of the network from hiring third-party processors. CoreStates says it will address.
Opening at the Top
The bank is still looking for someone to fill the slot of chief operating officer for the EPS division, a job that is being filled on an interim basis by Robert Gilmore, chief technology services officer. The executive would manage day-to-day operations for the division and report to Mr. Andersen.
Mr. Gilmore said in a recent interview that Mac planned to acquire small and large networks. "The future of the networks is consolidation," he said.