The planned acquisition of Tyme Corp. by Pulse EFT Association, both of which are bank-owned, is expected to create a strong counterweight to the specter of increasingly powerful publicly owned electronic funds transfer networks.
The deal, announced Thursday, would create an EFT network that would serve more than 3,000 members, making it the second largest in the country. But more important, it would bolster the efforts of financial institutions to keep an industry-owned alternative viable.
Concord EFS, a public company that in recent years has bulked up through acquisitions to become by far the biggest EFT network in the country, looms as a large motivator in the banking industrys efforts. Since 1999 the Memphis company has tacked on the networks of Star Systems, MAC, and Cash Station to build a far-flung system that serves 6,500 financial institutions.
And rumors have swirled in recent months that NYCE, the third-largest network, could go the way of Concord by being purchased by First Data Corp., another publicly owned behemoth.
The financial industry is reevaluating the importance of control over these delivery channels, said Stan Paur, Pulses president and chief executive officer, in a phone interview. Pulses board last year evaluated our strategic options and determined it was critically important to retain control.
Jim Martin, Tymes president of 21 years, said the merger will offer the financial industry a true alternative to the model represented by Concord. At Concord, financial institutions are considered clients, he said, but Pulse and Tyme are completely under the control of financial institutions.
Fred Spratlin, the new chairman of Pulse and senior vice president at First Tennessee Bank in Memphis, said Concord could have problems down the road because it is profit driven. It must continuously grow to satisfy its investors, he said.
The combined company, to be called Pulse, would adopt Pulses not-for-profit status, an operating principle that Tyme had abandoned in 1996 to become a for-profit entity.
The Tyme acquisition would be the second for Houston-based Pulse in less than a year. In January it bought Cincinnati-based Money Station. Once the Tyme acquisition closes, which is expected by late October, the Pulse network would cut across the center of the nation, from Mexico to Canada.
Mr. Paur said Pulse would continue to look at possible acquisitions for growth, though its options are thinning. Only a few small networks, such as Jeanie in Ohio and Shazam Inc. in Iowa, remain.
He said the company can still grow organically. In 2001, Pulse added 193 new members, and Mr. Paur projected adding as many as 200 to 300 by yearend. Were looking at any business opportunity that makes sense, he said. In the last two acquisitions we found two networks that liked our business model. It says a lot for the concept of Pulse that they didnt shop around, but went directly to Pulse.
He added that he believes financial institutions are going to utilize one or more networks. The challenge for the networks regardless of structure will be to deliver value, low cost, and services.
Tyme is based in Brown Deer, Wis., and has operations in Wisconsin, Minnesota, Illinois, and upper Michigan. Its 523 members operate 4,427 automated teller machines and 157,690 point-of-sale terminals, and have five million cardholders. Without Tyme, Pulse has 76,902 ATMs; 300,000 POS terminals; and 60 million cardholders, according to the company.
Tyme, the oldest EFT network in the United States, would initially retain its brand in the states in which it operates. ATM machines are frequently referred to as Tyme machines there. But the Pulse brand would be introduced gradually. Tyme came into existence in 1975; Pulse was founded in 1981.
The pricing schedule will be determined by Pulses board of directors. The ATM interchange withdrawal fee for Pulse is 50 cents and for Tyme is 43 cents. The point of sale interchange fee for Pulse is 10 cents and for Tyme is 5 cents.
The deal includes bringing three Tyme directors onto the Pulse board. Mr. Paur said those individuals will represent credit unions and community banks in the Tyme region. Some banks that are on both boards include Bank One Corp. and Wells Fargo and Co. Mr. Martin, the Tyme president, would become head of the new companys Wisconsin operations and would be based in Brown Deer.