Merging Cash Machines Along with the Banks

When big banks merge, and CEOs make bold pronouncements about financial-services synergies, ATMs rarely figure into the equation.

But that may be a crucial mistake.

The successful integration of teller-machine strategies, personnel, and equipment can improve a newly merged institution's chances for success in the retail market. By contrast, the wrong moves can confuse or alienate customers, making it harder for a bank to retain core deposits.

The following touches on some important factors involved in combinations of teller-machine programs and operations.

* COMMUNICATION

The best-laid plans for merging systems can be spoiled by bad communications with customers. Keep your customers informed about how the merger will affect them.

As soon as the merger is announced, customers will likely have questions. So as early as possible, the merging banks should send out letters or statement stuffers.

These notices should explain that because bank mergers take at least a few months to complete, there will be no immediate changes. They should also reassure customers that they will be informed of any changes before they happen.

In addition, customers should be reminded about the merger's advantages for them. Particularly important is that the combined network will comprise an expanded number of teller machines.

When announcing new procedures, simple disclosure is not enough. Be sure to explain how each change - for example, those involving fee schedules - will affect the customer. Tout the overall benefits of the merged program.

A technical disclosure of new terms and conditions may fulfill legal obligations, but it can also create confusion and misunderstanding. The solution? Enclose an explanation in plain English.

In every customer communication about teller machines, emphasize that the bank welcomes questions or comments about the merger. Back this up by making sure customer-service personnel - tellers, service representatives, personal bankers, and branch managers - know the facts so they can competently explain ATM-related changes.

* STAFF

A well-defined ATM strategy needs a strong leader, backed up by the best people from either side of the merger. Don't run the combined program by committee. Choose the manager best able to execute the chosen strategy, and select team members who have demonstrated the skills and ability to make the program work.

The staff will be cut substantially after most mergers. Be sure the remaining team is the best for the job ahead.

* STRATEGY

Behind every successful teller-machine program is a strategy. The strategy might emphasize customer service, brand equity, interchange revenue, fee income, or some other goal. The most important thing is that the strategy consistently drives every other aspect of the program. A combined program must have one clear strategy, not an indistinct melding of two dissimilar approaches.

Choose a strategy that fits with the overall goals of the merged institution. This may involve adopting the strategy of one of the partners for the combined system, or it may mean taking an entirely new approach.

If either or both of the banks have created strong brand identities for the proprietary ATM networks, and the ongoing strategy is brand-oriented, you will have to decide which identity will survive. In most cases, one partner is dominant, and that brand wins out.

* TIMING

How long will it take to merge the two programs? How will the merger be phased in?

There is no magic formula for how fast to combine teller machine programs. Some banks move quickly, while others take years. Most follow a multistage process.

An ATM merger is actually three distinct processes. One is organizational - bringing both programs under the same management. Another is operational; linking the two networks and eventually moving them to a single processing system and servicing structure.

The most visible is the merger of product lines, including a single price structure, standardized features, uniform signage, card reissuance, and integration into a unified retail product line.

* POLICIES

How does a bank credit deposits? How are PINs (personal identification numbers) issued? When do new customers get their cards? What accounts can be accessed?

This is another area where you can draw upon the combined experience of the merger partners. Try to determine which policies have been most effective at either bank in controlling losses or promoting usage.

* PRICING

Merging banks are likely to have significant differences in fee schedules for machine use. Fees for the combined program will probably be the touchiest issue with current customers.

But a carefully planned and executed pricing policy can have an enormous impact on the bottom line.

You may find you have a valuable source of information about the impact of pricing on customer retention and profitability; your own combined customer database.

If the merging banks have pursued different pricing policies over the past few years, you can contrast the impact on usage, fee income, new accounts, and closings.

What typically happens is that fees for customers of one bank go up, while fees for the other bank's customers remain the same or go down. If you will be raising the fee for interchange transactions for some customers, try to time the increase to coincide with access to the combined network.

* NETWORKS

When banks merge, they bring their networks with them. The combined institution may need to choose between Cirrus and Plus for its card base - you can't issue both - and may want to rethink its policy on membership in regional, credit card, and specialty networks to maintain consistency with its overall strategy.

* LOCATIONS

The new bank will need to sort out redundant locations, choosing the best sites for each drawing area. It doesn't make sense to have two sets of machines competing for traffic on the same street corner. Machines in closed branches may need to be relocated nearby if the site is a productive one.

* EQUIPMENT

The bank may have two different back office systems, and may use machines from different manufacturers. It is important to develop a rational, achievable technology migration strategy.

Before you combine processing on a single platform, it may be necessary to develop driver software for machines that had been supported by the other system.

Eventually, you will want to reduce the number of different machines supported.

* PROCEDURES

If pricing and policies are the most visible factors for customers, operations and procedures have the most impact on bank staff.

The biggest issue to resolve for many banks is whether to use third-party servicers or in-house staff for ATM balancing and replenishment. This is another area where merging banks may have an advantage, because they can compare real costs and benefits, based on real experience in their respective networks.

* CARD REISSUANCE

Define a reissuance schedule that supports the goals of the combined bank as well as the ATM merger schedule. Use the opportunity to launch card enhancements or pursue the card consolidation program you have been talking about.

If the merged banks operate in the same market, you may find customers with accounts and cards at both institutions.

Now many also be the time to launch your point-of-sale program. By piggybacking the distribution of POS branded cards on merger reissuance, you can reduce overall postage and card production expense, while presenting the debit card as one of the fruits of the merger.

PHOTO : STEPHEN LEDFORD advises banks on ATM's roles in mergers.

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