At a recent card conference, Edward Hogan, senior vice president of MasterCard International, caused a stir when he stated that regional ATM logos like MAC, NYCE, Honor, and Star are likely to disappear, to be replaced by national brands, such as Maestro and Interlink. Others echo this idea. "The network brand will go away eventually," said Dale Dooley, president of Shazam Inc., based in Johnston, Iowa. "We need to stop thinking of electronic funds transfer as a proprietary logo, and start looking at it as a universal payment mechanism." Large banks generally are interested in seeing the number of ATM brands drop. Tired of paying membership fees and supporting local marks in the different regions in which they operate, many superregional banks are pushing for network mergers. The most recent example of such a merger was New England's Yankee 24 network combining with New York's NYCE to form Infinet Payment Services Inc. "The big banks that are now expanding over several states are getting tired of supporting the infrastructure," said Joseph Wallace, president of System B, in Chicago. "They will want a simpler system that stresses their own brands, not the network brands." Some card executives argue that banks offering services over the Internet will want to differentiate themselves using their own logos - not the brand logos of the regional networks that process the transaction. Further, bankers who increasingly deal with their customers through alternative delivery systems will want to make sure that it is their brand - not the brand of a network - that stays in a customer's mind. Branding issues have been one of the major drivers of the shakeout in the ATM network business. According to The Nilson Report, a newsletter based in Oxnard, Calif., the number of regional shared networks has dropped to 75 from 135 five years ago. The consolidation has convinced many network executives that the time has come to rethink the role of the regional network. "The regionals served their purpose in starting the electronic banking trend," said Del R. Tonguette, president and CEO of Gulfnet Inc., in Slidell, La., in a recent letter to the editor of American Banker. "Now that they have laid the groundwork, the nationals can pick up the torch." However, just because the networks may have outgrown their original purpose does not mean they have no place in the ATM business, experts said. In response to the changing environment, some of the shared regional networks have expanded beyond the traditional business of switching ATM and point of sale transactions to build third-party processing businesses that bring them into competition with firms such as Deluxe Data Systems Inc. and EDS Corp. Some observers also believe that bankers should think twice before casting aside brand names that consumers have grown comfortable with. "Bankers are finally beginning to recognize the assets they've created" in the shared regional networks, said David Robertson, president of The Nilson Report. "The financial institutions believe they can leverage the brand identity as the regional systems develop the infrastructure to offer remote payment systems." As evidence, Mr. Robertson cited a prepaid telephone card offered in October by Magic Line. Other companies, such as Electronic Payment Services Inc., Wilmington, Del., have taken it upon themselves to develop new products for their member banks, like smart cards and stored-value cards that carry the logo of the MAC network that EPS operates. "The brand is a powerful component of what we do," said Richard N. Garman, president and chief operating officer of EPS, which operates the MAC ATM and point of sale network, among other businesses. EPS is hardly a typical shared network, but many believe it is the blueprint of the modern regional. Founded in 1992 by a group of eastern regional banks, EPS derives far more revenue from its business as a processing company than from its traditional ATM switching business. Since EPS' formation, others, including NYCE, have followed the leader by bringing computer systems in-house, selling processing services, and, like EPS, trying to redefine its role as a broad-based service provider. With these processing capabilities, many believe that even if the regional network brands fade away, the networks will continue to have a place in the industry, if a much changed one. "The question becomes, 'Are there other functions beyond brand management that the regionals provide that EDS or the national networks can't?" Mr. Wallace said. "In some cases, I think there are." Many shared regional networks have a niche as the lowest-cost producer of switched transactions, said Mr. Wallace. Regional networks also provide services such as product development and testing for brand awareness without competing with banks. Conversely, some bankers perceive the card associations and EDS as competitors. "Some banks don't want to do business with Visa," said Ronald V. Congemi, president of the Star System, based in San Diego. He pointed to a recent collaboration between Visa U.S.A. and Microsoft Corp. to develop security software for financial transactions on the Internet. "Visa now wants to license that software back to the banks that paid for it" through their ownership of Visa, Mr. Congemi said. In a recent article in The Wall Street Journal, William Randle of Huntington Bancshares was quoted as saying that companies like Visa, Microsoft, and Intuit Inc. - the personal financial software maker - get between the banker and his customers. But the networks are undeniably in transition. Star System, which has long let Deluxe Data handle its transaction processing, recently has considered buying a processing business. A bid to buy Northeast Switch last year failed, and the company does not plan to take its processing in-house without buying a book of outside business. The costs of building such a business from scratch are too high, said Mr. Congemi. But, on its drawing board are plans to have bill payment companies attach to the Star network switch, and to link member banks with Intuit and Microsoft so that customers who use Intuit's Quicken or Microsoft's Money software can get access to their banks. Star also is enhancing its ATMs to include mini statements, access to multiple accounts, and point of sale transactions. In the Washington, D.C., market, Internet Inc., Reston, Va., which operates the Most network, is looking to establish "syndicates" with other shared networks, in which Most would have an equity position, to share the costs of product development in areas such as smart cards. Internet's chief operating officer, Richard G. Lyons, said he believes that despite increasingly overlapping logos, the shared regional networks will survive, and will form the backbone of the national debit card systems of MasterCard and Visa. "The role of the regional network is conducive to developing and providing ongoing support for banks' back offices," he said. "We're a good consolidator of services." Ms. Brokaw is a freelance writer based in San Francisco.

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