Mellon Bank Corp. has decided to buy an equity interest in Electronic Payment Services Inc., making it a partner in what is shaping up as the most powerful force in retail electronic banking.

Mellon said it signed a definitive agreement to take a 23.66% interest in the company that owns MAC, which processes more transactions through its central switch than any other regional automated teller machine network. The Pittsburgh bank would become the fifth super-regional in the joint venture, with a sixth partner - Cleveland's National City Corp. - coming aboard later.

The buy-in is a coup for Wilmington, Del.-based Electronic Payment Services, since Mellon did not align with NYCE, the big northeastern network that was also said to be courting the Pittsburgh bank as an equity partner.

Will Transfer Unit to MAC

Mellon is paying $29 million in cash and transferring control of its Network Services Division, a transaction processing unit, over to Electronic Payment Services.

Mellon's equity stake will be equal to that of CoreStates Financial Corp., the original owner of MAC, as well as Banc One Corp. and PNC Financial Corp.

Society Corp. will own 5.35% when Mellon buys in. The deal is expected to close in the first quarter next year, pending regulatory approval. All the interests will change when National City Corp. - as was announced in October - becomes an equity owner, probably at the lower end.

Mellon's decision was not surprising, given MAC's strength in and around Pittsburgh, said Richard Speer, chairman of Speer & Associates, an Atlanta-based consulting firm that works with many of the top electronic banking networks.

|Tipped the Scales'

Mr. Speer said the regional connection "tipped the scales" in a close competition with NYCE.

Mellon and MAC also had a history of working together. In 1988, Mellon decided to sell its ATM network, known as Cash-Stream, to CoreStates, then the owner of MAC. That left Mellon as a regional network participant, rather than an owner.

"Mellon had been looking for a home for the last three years," Mr. Speer said.

The ATM and merchant processing business Mellon retained after the CashStream sale now goes over to MAC with the Network Services Division. It earns $40 million a year serving about 800 financial institutions and 50,000 retailers.

Still in the Market

Mellon last week had completed the sale of two other data processing businesses to Fiserv Inc. of Milwaukee. But bank executives said the Network Services transfer is strategically different.

John F. Beahn, a Mellon general manager who will become president of the EPS Network Services Division, said: "The bank is investing rather than divesting in this technology, by bringing cash to the table and by taking an equity position in EPS."

Along with Mr. Beahn, 168 Network Services employees will move to EPS.

EPS chief executive officer David Van Lear said he is still in the market for additional equity owners.

"We have proposals going with a couple of potential strategic partners," he said. He declined to name them but said EPS is intent on expanding the network's geographic reach beyond the Mid-Atlantic and mid-western territories served by the current owners.

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