Aggressive plays for transaction growth by Visa and MasterCard have spread fear among executives at regional electronic funds transfer networks-but not Richard Garman.

The president and chief executive officer of Electronic Payment Services Inc. anticipates so much growth in the transaction processing business that he is content to give competition free rein.

"We're pretty bullish about the world," Mr. Garman said in a recent interview. "The trends in the industry are very supportive of our business model."

The Wilmington, Del., company owns MAC, one of the largest automated teller machine networks, and the Buypass point of sale service, which has dived headlong into the growth stream of electronic benefits transfer processing. Since 1995, EPS' payroll has grown to 1,100 from 850.

If there is something to fiddle with, it is the ownership of Electronic Payment Services, now in the hands of five banking companies. Mr. Garman has his eyes on merger or initial-public-offering opportunities.

That kind of thinking comes naturally to this former Montgomery Securities mergers and acquisitions specialist. The right kind of investment banking transaction could "grow the business by a factor of three or four," he said.

"We are very well positioned," Mr. Garman added. "We think some of the competing organizations are struggling quite a bit and it's a good time to be bigger."

The national bank card associations are shaking things up with their growing debit card market shares. Visa's new debit program, known as check card II, could attack the regional ATM and POS networks' strongholds.

Mr. Garman said the Visa product, with an interchange rate of 65 cents for a $100 transaction at most merchants, will put upward pressure on the ATM networks' prices, which are typically 3 to 11 cents a transaction.

ATM network interchange rates have been "artificially low for a long time," he said. "You are going to see on-line interchange go up. It's positive for our business model, and I think it's the right answer for the industry."

Mr. Garman arrived at EPS in 1995 as president and chief operating officer, and he became chief executive officer in February 1997 when the company needed turnaround help.

Originally a subsidiary of CoreStates Financial Corp., it was spun out to the wider group in 1992-with Mr. Garman's assistance while he was at Montgomery Securities. The current owners are CoreStates' buyer, First Union Corp.; Bank One Corp.; KeyCorp; National City Corp.; and PNC Bank Corp.

EPS had developed a reputation as arrogant and slow to respond to customer needs. There was a noticeable executive turnover rate, and the failure of an ambitious smart card venture was expensive and embarrassing.

One of Mr. Garman's first acts was to scrap the smart card project. It clashed with "core competencies like terminal driving and switch processing," Mr. Garman said. From now on, "we're sticking to the things we know how to do."

With the growth of electronic benefits transfer and of debit card use, Mr. Garman said he sees no need to look further afield. EPS clients and owners alike give him credit for streamlining and focusing the company.

Mr. Garman "hired outside consultants to sit down for hours to find out what was working and what was not working," said Joseph Gable, vice president of ATM delivery systems at First Union.

Mr. Garman took his time in making big decisions, and he promoted some respected insiders. Key appointments included last year's promotion of Ruth Ann Marshall, who heads Atlanta-based Buypass, to executive vice president of EPS. He also kept Philip Valvardi at the helm of MAC and gave him the title of president.

"They came with a vision," said Gary M. Jewell, senior vice president of Carrollton Bank of Baltimore. "The biggest responsibility falls on those guys for directing middle management."

In the third quarter, EPS processed 386 million transactions through its central switch, 18% more than in the 1997 period.

Point of sale transactions for the quarter increased to 36.8 million, up 25%, fueled in part by the installation of 53,000 terminals in 8,000 Chevron Products Co. stores.

MAC expanded beyond its base in the Middle Atlantic states by signing up 22 Michigan institutions this year. Total MAC membership is more than 2,200.

EPS services more ATMs than any other network. Its recent purchase of the terminal-driving business of 3,000 ATMs from Transaction Network Services Inc. of Reston, Va., helped boost its count to 33,000. All told, 39,000 ATMs carry the MAC logo.

Buypass, which operates in 33 states, has become dominant in EBT processing. In the first half of 1998, Buypass added 11,000 merchants to its network.

Mr. Garman, who spent four and a half years at Montgomery Securities before joining EPS, has also focused on customer service. Soon after assuming the top job in 1997, he began linking customer survey results to employee performance. Fifteen percent of his salary is tied to results of three questionnaires the company sends to its customers each year, Mr. Garman said.

In the early 1990s, "EPS had a justified reputation where they were very static and strict," said Mr. Jewell of Carrollton Bank, a client of EPS. "In the last three to four (years) they have really come around. They jump right on something. When I have a request, they help me out."

On the other hand, one industry consultant and former EPS executive, Michael Strada, said EPS seems "more concerned with dressing the company up to be sold" than with investing in infrastructure.

Mr. Strada, president of Electronic Commerce Strategies Inc. of Atlanta, said: "EPS does not seem to be putting the money back into the company."

Mr. Garman, a native of Poplar Bluff, Mo., graduated from Southwest Missouri State University. He earned an MBA from Oklahoma City University at night while working at First Data Management, a company that is now a First Data Corp. unit.

Mr. Garman, 41, said his years at Montgomery Securities in San Francisco (now part of BankAmerica Corp.) primed him for what he believes is EPS' next stage.

"The strategy is to grow the business to grow the earnings," Mr. Garman said. "And one of the ways that helps you execute that strategy is being publicly capitalized."

Mr. Garman said EPS' performance and emphasis on customer service will make it an attractive public offering or takeover candidate. He likened the scrutiny by the current owners to that of Wall Street analysts who follow public companies.

"There are certainly a lot of expectations," he said. But "it's really a pretty simple business as long as you do a few things well. We are revenue- driven, we are an outsourcer."

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