An automated teller machine pioneer's plans to build a new ATM and electronic funds transfer network are finally taking shape: Bipin Shah and his company, Genpass Inc., have bought two small networks and hired a team of veterans who hail from the same bank, the former CoreStates Financial Corp.
Mr. Shah, who took a hiatus from the ATM industry to attend to personal matters, came back in 1999 as president and chief executive officer of Genpass Inc., and his recent activities there have fueled speculation that he is trying to build a new national ATM superpower.
Last July, Genpass began operating in earnest when it acquired the MoneyMaker ATM network of Dallas, the fourth-largest driver of ATMs and the seventh-largest transaction-switcher in the country.
In December, Genpass purchased Money Belt - the 17th-largest U.S. ATM network - from First Tennessee National Corp. That brought the number of ATMs that Genpass owns to 17,500. The company also does the processing for the 5,000 ATMs owned by E-Trade Bank.
Mr. Shah said the deal for Money Belt "signals the beginning of aggressive growth that Genpass is seeking."
"The atmosphere in our industry is very turbulent, but we believe we are positioned with the technology platform, the business lines, and the vision to become one of the major players in the EFT business," he said.
Genpass' recent acquisitions also include some marquee names in the ATM business. The team looks a lot like the old crowd at CoreStates (acquired by First Union in 1998) that spent the early 1980s pioneering the Money Access Service Corp. (MAC) network, which is now owned by Concord EFS of Memphis. There is Greg Dillett, who is Mr. Shah's partner and Genpass' CFO. Douglas D. Anderson, who left CoreStates to run a fraud detection company called Card Alert Services, recently joined to head a new subsidiary called Genpass ATM Solutions, which, among other things, helps ATM deployers select appropriate locations for their machines.
Genpass, of Fort Washington, Pa., is owned by the private equity firm GTCR Golden Rauner LLC. With its network in place, Genpass will shift its focus to the placement of ATMs and finding new functions for them, Mr. Shah said.
"Location, location, location," he added. "My guys went into an Office Depot [where Genpass owns ATMs] to find out why there is no volume. They said: 'Bipin, we can't even find it. It was way in the back.' "
Mr. Shah is undaunted. If he cannot persuade a merchant to bring the ATM front and center to where the people are, he said, he will make sure signs for the machines are prominently displayed.
Some Genpass ATMs in 7-Elevens in Texas offer Internet access and other advanced functions, such as check cashing. But Mr. Shah and Mr. Anderson are skeptical about the potential for e-commerce over teller machines.
"Let's be realistic," Mr. Shah said. "Consumers do not go to ATMs to get on the Internet. They just want to get their cash and get out of there."
Mr. Anderson said: "I think there definitely will be a connection" to the Internet, "but we don't have programs aimed in that direction at the current time. Consumers will not be anxious to stand on line while someone performs a six-minute transaction."
The working relationship between Mr. Shah and Mr. Anderson dates back to 1979, when they helped set up an agreement among local banks in Philadelphia to share their ATMs with one another's customers. This evolved into the Money Access Service Corp. (MAC) network, which expanded over time into a superregional one.
Mr. Anderson, who was the chief executive officer of MAC, was instrumental in building the network, while Mr. Shah, who was CoreStates vice chairman in charge of the MAC network, led the way into debit at the point of sale.
Mr. Anderson and Mr. Shah were also early leaders in placing ATMs outside of bank branches. While the long-ago decisions to put them in high-traffic retail spots like supermarkets, convenience stores, and gas stations made sense, Mr. Shah said, many of today's ATM placements make no economic sense. Mr. Shah recalled recently finding an ATM in a flower shop. "It's ridiculous," he said. "How many people go into a flower shop to get money?" The owner of the store said the average number of transactions per day was one, Mr. Shah added.
With ATMs glutting the market, and the use of them dropping in proportion to their numbers, both Mr. Shah and Mr. Anderson said it is crucial to put teller machines in busy locations. They "are no longer a competitive tool, because access is so ubiquitous," Mr. Anderson said. "Basically we see a need for consolidating, and making sure ATMs are placed such that they afford consumers convenience but are not a cost burden to the installer."
Mr. Shah is wary of any innovation that forces consumers to change habits, such as smart cards. He says Web commerce in general should be transparent to the consumer. "Why do we need a new card just because of the Internet?" he asked. "The Internet is no different than automated teller machines. Safety and security can be built into the appliance," such as the keyboard.
However amorphous Genpass' plans may be at the moment, the company has generated quite a bit of buzz in the industry because of its management's pedigree and long track record.
"For Doug to go and work for Bipin, I've got to believe they have something they can be very successful at," said Michael A. Strada, president of Electronic Commerce Strategies in Atlanta.
But Mr. Strada, who was once the president of the Honor ATM network (now part of Star Systems Inc.) and who also worked for Mr. Anderson in the early days of the MAC network, said Mr. Shah has his work cut out for him if he intends to build a major network.
"If he's going to do purely ATM stuff and he wants to become another national network, that's going to be very difficult," Mr. Strada said. The largest network in the country, Concord EFS, owns about 59,000 ATMs and controls most of the debit card network in the country, he said. Concord owns MAC (which it refused to sell to Mr. Shah) and is buying Star Systems, the largest network in the land. That deal has not received regulatory approval yet.
J. Joseph Gable, who worked with Mr. Shah at CoreStates, recently posted an exuberant message on the CoreStates alumni message board. Under the heading, "Bipin Shah returns to the ATM industry," he wrote, "I am very confident that Bipin will do many exciting things with new Internet technology that will get the attention of the entire industry."
Mr. Gable, who was once director and vice president of the retail delivery systems group at CoreStates and in November joined Gasper Corp., the ATM software company, said in a telephone interview, "Bipin is a man with a lot of vision, and I think he's going to energize the blood of a lot of us who have been in the business for a long time. We've been talking for years about moving ATMs into another area where we could generate more profit."
David Lipkin, a lawyer who heads the electronic commerce group at Drinker, Biddle & Reath LLP in Philadelphia, was unequivocal about the company's chances, calling Mr. Shah "brilliant" and "visionary." Mr. Lipkin said Genpass will attempt to sell processing services to financial institutions, and will likely try to amass a major network of its own.
Mr. Lipkin was chief council for MAC when it was founded in 1978, and he said Genpass could compete with Concord and NYCE Corp. by buying some of the smaller networks in remote locations.
"Bipin is a very competitive person," Mr. Lipkin said. "There are a lot of agencies, some maybe struggling, that are ripe for consolidation.