The regional electronic banking industry continues to consolidate, with the top 20 networks getting more transactions and automated teller machines as smaller networks decline.

According to an annual survey of shared networks by Atlanta-based Speer & Associates, the number of ATMs in the top 20 networks rose in 1993 by almost 16%, to 91,704.

In other words, 93% of the nation's 98,600 ATMs in 1993 were connected to one or more of the top 20 networks.

The Top 20 Regional Networks Ranked by monthly interchangevolume in millions ATMs Transactions 1 MAC 14,075 40.8 2 Star 15,529 19.1 3 NYCE 12,900 17.9 4 Honor 9,164 12.3 5 Exchange 3,878 8.1 6 Most 5,180 7.4 7 Pulse 5,700 6.8 8 Cash Station 3,434 6.7 9 Jeanie 1,100 6.210 Money Station 4,518 4.911 Presto 504 4.612 Shazam 1,450 4.413 TYME 1,100 4.214 Instant Cash 1,426 3.315 MPact 915 3.016 Yankee 24 3,885 2.917 Magic Line 3,723 2.918 The Co-op 542 2.819 Fiserv 860 2.520 MoneyMaker 1,600 2.0

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Similarly, those leading networks, including such prominent players as Honor, MAC, NYCE, and Star, handled about 91% of ATM interchange transactions, which occur when a cardholder from one bank uses another bank's ATM. The interchange total rose by 17% last year, to 162.5 million per month.

Industry experts predict that as the electronic funds transfer industry consolidates, the larger networks will squeeze out smaller ones that have not created a specialized niche for themselves.

"Those networks that do nothing more than switch transactions for their members have a very limited life expectancy," said Dale A. Dooley, president and chief executive officer of ITS Inc., operator of the Shazam network in lowa.

The Johnston, Iowa, company is one that has added credit card processing, ATM-driving, and other support services to its core switching business.

In 1993, the number of networks in the United States dropped from 63 to 58, continuing a trend that has seen the ranks diminish by 38% this decade, the Speer study found.

Opinions vary on how long the consolidation will continue, but most observers feel that another 25 to 35 networks will disappear by the time the shakeout ends.

Based in part on the scale efficiencies in the network consolidation, Speer & Associates estimates that ATMs will become more profitable for financial institutions.

By 1998, the firm said, ATM-related revenues at banks will rise by more than 80%, while costs will rise only 25%.

Now, though, ATMs are seen as money losers for the banking industry. Speer's survey said industry-wide ATM expenses in 1993 exceeded revenues by more than $900 million.

The Consumer Federation of America, a Washington-based umbrella group for consumer advocacy groups, disputes the cost conclusions. It claims that Speer underestimates the savings that ATMs have delivered to traditional branch banking.

As Speer sees it, the U.S. ATM industry will turn a profit beginning in 1995, and the industry-wide profits would approach $1 billion in 1998.

"With expanded geographical coverage, continued transaction growth, and moderating transaction-fee growth, revenues will increase enough to make the U.S. ATM program profitable in the next few years," said Richard Speer, chairman of the consulting firm.

To be sure, many of the superregional financial institutions running the larger ATM programs are squeezing profits from their self-service terminal networks. But even for the big ATM players, profitability is still a relatively recent development.

While some of this increased profitability comes from raising transaction fees, a significant portion also comes from cutting ATM support costs.

This cost-cutting push may be the most significant factor driving the shared network consolidation. Banks with ATMs in multiple states, particularly institutions in superregional holding companies, have been looking for ways to streamline their relationships with multiple networks and associated costs.

Each network typically has its own operating rules, computer links, and brand name.

Merged Under Pressure

Two of the highest-profile mergers resulted from pressure placed on networks by one or more of their superregional members, observers have said.

With NationsBank in a lead role, three of the Southeast's regional networks - Honor, Avail, and Relay - combined several years ago to create a single network under the Honor name.

In the Northeast, Fleet Financial Group's decision to leave Yankee 24 and take an equity position in NYCE is widely viewed as the catalyst for the merger of those two networks, expected to be completed in the next few weeks.

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