It seems we are on the eve of interstate branching, and for the first time since the 1930s, smaller institutions will have to compete with the national banks aggressively entering their markets. The cost of providing electronic funds transfer (EFT) services is at the very heart of their ability to do so. Until last summer's settlement between the Justice Department and the MAC network--an ATM interchange network operated by EPS, a company owned by several large banks--community banks were in a very untenable position. MAC reportedly required that members use EPS for their "on us" processing as well as switch processing.

Access to network ATMs has become so important that for all intents and purposes, smaller institutions were forced to comply. The Justice Department essentially held that this practice is monopolistic. While MAC agreed to stop the practice without admitting any wrongdoing, the settlement put all large ATM network operators on notice that the U.S. government will not allow such behavior to continue.

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