U.S. Bancorp's already significant position in the business of operating automated teller machines advanced substantially on Tuesday with its acquisition of Genpass Inc.
Janet O. Estep, an executive vice president in the Minneapolis banking company's transaction services division and the manager of its Elan Financial Services business unit, said the acquisition also demonstrates U.S. Bancorp's commitment to building up its payments operations.
Genpass "is very complementary to the transaction services division," especially its customers, geography, and capabilities, she said in an interview.
Genpass, of Fort Washington, Pa., provides ATM processing and ATM driving services to both banks and the independent sales organizations that put ATMs in stores. Ms. Estep said it is strong in the South, the Southeast, and the Middle Atlantic, while Elan is strong in the Midwest, the Northeast, and the West Coast. Elan provides similar ATM services, primarily to banks; Genpass has roughly 1,000 customers, including a mix of banks and ISOs.
U.S. Bancorp's payment services business, which includes its ATM operations, generated $164 million of first-quarter net income, or 15.3% of the parent's total net income. ATM processing generated $47 million of non-interest income, or 3.4% of the company's total.
Genpass is ranked as the second-largest driver of ATMs, with 30,000 machines, Ms. Estep said. First Data Corp.'s Star network holds the top position. In December, Elan said it operated 7,800 ATMs in 33 states.
Genpass was owned by the Chicago private investment firm GTCR Golder Rauner LLC and was said to have been up for sale for months.
Tim Sloane, the director for debit advisory services a Mercator Advisory Group in Waltham, Mass., said the purchase represents "a fundamental shift" in U.S. Bancorp's strategy. "Now they're looking to become a primary outsourcer of ATMs for banks, both in installing and managing ATMs."
Tony Hayes, the managing director of Dove Consulting Inc. in Boston, said ATM networks are "built around economies of scale, and whenever you combine two players, the end result is one, more competitive entity."
As a venture-backed company, at some point GTCR needed "to monetize their investment and U.S. Bank represents a logical and well-capitalized buyer," Mr. Hayes said.
Bipin C. Shah, a legendary figure in the ATM industry, founded Genpass in 2000. He was instrumental in developing the MAC network, one of the earliest and most successful ATM and debit networks, at the former CoreStates Financial Corp.
Ms. Estep said that Mr. Shah has left Genpass, though U.S. Bancorp will retain most of the remaining 350 employees.
"He did a great job of planting the seeds and growing" Genpass, she said.
Ms. Estep will manage Genpass, which will retain its brand as a wholly owned subsidiary of U.S. Bank. She also said U.S. Bancorp will retain Genpass' Irving, Tex., facility.
In 2000, Genpass acquired two ATM networks: Money Belt, from First Tennessee National Corp., and the Dallas MoneyMaker ATM network.
The two deals brought the number of ATMs that Genpass owned to 17,500. In 2003 it decided to turn those two networks into a surcharge-free network under the MoneyPass brand.
U.S. Bancorp also has its own debit network called Fastbank, and a surcharge-free ATM network called Fastbank Free. Ms. Estep said that MoneyPass and Fastbank Free "will not be consolidated on day one," but over time U.S. Bancorp will "take the best features of both networks and combine them."
Mr. Sloane said that Fastbank Free was not getting a lot of customers. "Genpass has had a larger surcharge-free environment, and surcharge-free is getting pretty hot."
