Joseph E. Wolfson hopes to make a provocative splash not just with his new company's transaction processing strategy, but with its name.
Mr. Wolfson has adopted "Cartel" as the unifying theme and logo of the company he formed late last year, Integrated Delivery Technologies Inc. of Buffalo.
The name has passed several focus-group tests without suffering from any monopolistic or criminal connotations, Mr. Wolfson said. At least one supermarket executive questioned by American Banker was receptive to the brand, and Mr. Wolfson is proceeding as if there were no obstacles.
"Everybody we've shown it to loves it," he said in a recent interview. "We'll use 'Cartel Network' as the centerpiece for all we're doing.
"If baggage comes along with it, so be it. People will get used to it."
The confidence and swagger are typical of Mr. Wolfson, one of the pioneers of retail electronic banking in the 1970s and 1980s. He was the first chief executive of Metroteller, an upstate New York *network of automated teller machines and in-store terminals, which merged about five years ago with the multistate MAC system.
Mr. Wolfson acquired a reputation as an innovator and a maverick in a market that became increasingly dominated by large networking ventures and their big-bank owners. Metroteller was originally owned by a Buffalo-based savings bank, the defunct Empire of America, and prided itself on close relationships with the supermarkets and other retailers that participated in its "point of banking" service.
After several years in the telecommunications business, the outspoken Mr. Wolfson is returning to a market that he believes has not been well served by the bank-owned networks.
Drawing on his retailing contacts, Mr. Wolfson claims to be well on the way to building a business around their interests.
"We are going to be closely allied with the retailers," he vowed. "They haven't been treated fairly."
The bank-owned MAC and NYCE networks, which pervade the northeastern markets Mr. Wolfson knows best, may look askance at the upstart Mr. Wolfson. But he is striking a chord in the supermarket community, where those networks are trying to sustain rapid growth in point of sale transactions.
Integrated Delivery Technologies "represents a chance for us to have a say over the policy and pricing of these networks," said Larry Friedman, vice president of financial services at Golub Corp./Price Chopper Supermarkets in Schenectady, N.Y. "We want to see the playing field leveled and have control over our destiny, which we don't have now."
Mr. Friedman and other supermarket people are reeling from recently announced fee increases by MAC and NYCE. These were part of a nationwide trend that the ATM and debit card networks describe as a move to fair cost- based pricing, but which the stores view as unilateral, unjustified, and counterproductive.
Price Chopper is one of a handful of supermarkets that own an electronic transaction switch, which requires direct connections to interchange networks for debit card, credit card, and ATM transactions.
Additional interchange fees like MAC's 6.5 cents and NYCE's 7.5 cents can significantly raise a store's costs, Mr. Friedman said. His NYCE tender cost rises from a "reasonable" four cents to 11.5, which raises questions, he said, about a big portion of his company's investment in point of sale technology.
Mr. Friedman believes a new market entry can inject a healthy dose of competition. He likes the Metroteller track record of Mr. Wolfson, the new venture's chairman and chief executive, and his longtime business partner Craig S. McIntyre, president and chief operating officer.
"Metroteller had the best balance (between card-issuing institutions and acquiring merchants) I've seen," Mr. Friedman said. "They were very innovative, highly motivated and self-driven, and refreshing to deal with," he said, in contrast to the existing powers that have done little to make the retailers feel included or wanted.
Richard P. Yanak, chief executive officer of Infinet Payment Services, the New Jersey-based operator of NYCE, said he can understand the negative reaction to the interchange fee, scheduled for April 1. He also concedes "we could have done a better job" communicating with the retailers, and Infinet is planning to organize a forum for their benefit.
Mr. Yanak said he gets a sympathetic hearing from supermarket operators when he discusses the economics of the payments business and how they have been changed by the stores' acceptance of credit cards. Even with NYCE's interchange fee - which he said is late compared to other regional networks' - he contends on-line debit economics are still better than the alternatives.
Mr. Yanak questions the impact Mr. Wolfson can have, beyond possibly serving as an advocate or agent of the supermarkets. "I don't see what he can do operationally that lowers the retailers' costs," Mr. Yanak said. "I can't see him creating a network tying together all the endpoints we do."
Mr. Friedman of Price Chopper said he would not expect Mr. Wolfson's company to pose a direct threat to NYCE or MAC. They are two of the biggest networks, each with more than 15,000 ATMs and tens of thousands of retail point of sale locations.
"I think they can peaceably coexist," he said. "What (Cartel) could do is route my transactions to financial institutions, particularly smaller ones that don't have a big say in the big networks and don't qualify for quantity discounts. Then everybody can benefit through lower costs."
Mr. Friedman cited a 1994 Food Marketing Institute study that showed the fully loaded cost of a supermarket's accepting a check was 37 cents, compared to 30 cents for an on-line debit card. NYCE's 7.5-cent hike, meant to make the debit-acquiring business more attractive to its bank members, would wipe out the cost differential, "and that's scary," Mr. Friedman said.
He added that the impact on Price Chopper, which does only "a couple percent" of sales on debit cards, would be less than at stores in the more mature California debit market that do 15% or 20%. He warned that reckless price increases could inhibit growth. As a lower-cost alternative, Price Chopper is looking into transmitting debit payments off-line through the automated clearing house.
Mr. Friedman added that Mr. Wolfson's Cartel brand could fit with Price Chopper's desires.
"It should be in my interest to promote and advertise a card, and a brand identity could certainly help," Mr. Friedman said. "We would certainly be open to doing joint promotions.
"We did a lot of promotions with MAC and NYCE, and then they raised their prices without even discussing it with the acquirers."
Mr. Yanak was critical of the private-branding strategy. "Supermarkets that have created their own POS cards have been less than successful," he said. "Consumers have to volunteer information (to route payments over the automated clearing house) and they are reluctant to do that. They do it with banks because they have a level of trust and confidence that I don't think they have in supermarkets."
Mr. Wolfson's business plan is not quite like that of any other transaction processing entity. He said he could end up competing directly or indirectly with the likes of MAC and NYCE, and he could be in alliances, joint ventures, or even equity arrangements with a prominent processing company. He has begun negotiating with several, whose names he does not want to disclose.
The proposed brand identity, Cartel, has been registered with the U.S. Patent and Trademark Office. Mr. Wolfson envisions the name on ATMs and point of sale terminals, at check-cashing sites and on a corresponding check-cashing card, and at any other payment point such as a utility office.
The company also has designed a Cartel Auto card, emblematic of its planned 1995 introduction of on-line technology and services for automobile dealerships.
"We had to have a name that is unique and not used so much that it couldn't be protected," Mr. Wolfson said. Cartel is "strong, sophisticated, and distinctive - people won't forget it. And if you look up the definition in the dictionary, which talks about cooperating to accomplish something, it says a lot about what we are doing."