As head of the NYCE network, David A. Huemer faces a tall task. Like other networks in the Northeast, NYCE is gearing up to do battle with Electronic Payment Services Inc., a joint venture of four" superregional banks' automated teller machine networks.

Formed last summer when Banc One Corp., CoreStates Financial Corp., PNC Financial Corp., and Society Corp. pooled their ATM and point-of-sale operations, EPS now boasts 12,000 automated teller machines, and rivals the Star System Inc. as the largest ATM network. The new organization's point-of-sale segment could be a powerful force in a market thought to be poised for significant growth.

But Hackensack, N.J.-based NYCE, a subsidiary of New York Switch Corp., has moved to meet the challenge.

In late September, Mr. Huemer replaced Alan P. Pohlman as president of NYCE. Mr. Huemer, also appointed president and CEO of parent New York Switch, will focus on the network's strategic positioning, while Mr. Pohlman handles day-to-day responsibilities as chief operating officer.

Recapitalizing for Growth

NYCE, the dominant network in the New York area, is also recapitalizing to strengthen its position for possible acquisitions, moving its transaction switching operations in-house, and redoubling its efforts in the POS/debit arena.

"We intend to consolidate our market and look for alliances and acquisitions," said Mr. Huemer, who managed his own consulting and marketing company before joining NYCE. "We intend to ensure that NYCE will be a survivor."

Mr. Huemer declined to divulge specifics about the recapitalization plan, which was authorized by the network's owners. They include the Bank of new York, Chemical Bank, Chase Manhattan Banks NatWest Banks, Marine Midland Bank, Fleet Financial Group Inc., and BayBanks Inc.

Rumors had circulated that the network might move to absorb Yankee24, a regional competitor. But Mr. Huemer said negotiations with the Wallingford, Conn.-based cooperative broke down when it decided to remain independent.

NYCE recently moved transaction-switching operations in-house, after years of relying on Deluxe Data Systems Inc. in Brown Deer Wis. All of the network's, ATM and point-of-sale interchange transactions are routed through a hub in New Jersey, which was brought on-line last month. The move is expected to cut costs and enable NYCE to gain greater control over its products and services.

"Anytime you go to a third party, you pay a margin," Mr. Huemer said. "Because of consolidation, it's increasingly important to be a low-cost player."

While NYCE has long ranked among industry heavyweights in ATM transaction volume, it has yet to emerge as more than a blip on the POS radar screen. The network's 1,921 terminals lag behind industry leader Star System's 13,283. Mr. Huemer ascribed the gap partly to the fact that POS hasn't caught on as quickly in the Northeast as in other regions.

Focus on Supermarkets

But he promised to step up NYCE'S efforts in that area. Eschewing the costly, broad-based advertising campaigns it has used in recent years, NYCE is pinpointing its focus on point-of-sale marketing at a handful of supermarket chains.

Richard P. Robida, senior vice president at the ATM consultancy Speer & Associates in Atlanta, expects NYCE to attempt to grab a larger slice of the POS pie.

"There are lots of ways to enter that business; they haven't missed the train yet," he said. "But precisely what they do depends on the will of the network's owners."

Mr. Huemer cited the benefits-transfer business and other electronic payment services as areas where NYCE must expand if it is to survive.

"Over the last several years, NYCE and other network organizations have viewed the business primarily from a transaction perspective," he said.

"That has created many strengths. But in an effort to chase transactions, significant duplication of proprietary positions has developed. That's part of what's driving consolidation in the business. Any given card might have 80 marks on it. A consumer sticks that card into a slot never knowing which mark is generating the transaction. That's good for volume, but it blurs competitive distinctions."

Mr. McCarthy is managing editor of Chief Executive magazine.

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