To understand what makes Star System Inc. tick, consider Southwest Airlines.

"Southwest is a good example of a regional business that's done a better job of serving its region than many of the bigger carriers," said Ronald V. Congemi, the electronic banking network's 48-year-old president.

"If we pattern ourselves after Southwest and continue to concentrate on serving our region, we'll be doing pretty damn good."

There is plenty to admire about the Dallas-based airline that specializes in short-haul service, surpasses larger competitors in productivity and customer-satisfaction ratings, and encourages an iconoclastic corporate culture.

Similarly, Star has excelled by staying focused since its start in 1984 on connecting automated teller machines throughout a well-defined geographic area - the states west of the Rocky Mountains.

"We simply do it better than the nationals," Mr. Congemi said in a recent interview. "We understand our market. We have better pricing and higher levels of service.

"We deal solely with the issues of the western financial institution market. We do not concern ourselves with the Southeast or France."

Although it tops the nation's regional networks in total ATMs (18,500), point of sale terminals (85,726), and monthly transactions (35.5 million in July, 26% of them via point of sale), San Diego-based Star operates with a fraction of the staff other big regional networks employ.

"We've got 25 employees total," said Mr. Congemi. "We've always kept the organization small because there was no need to get big. All the people here perform at least two jobs.

"This outfit is directed toward - and certainly happier when - simply getting things done," he continued. "It really comes down to attitude and energy."

Mr. Congemi suggested that his employees, like Southwest Airlines', have those qualities in abundance.

Star accomplishes a great deal with relatively few people by eschewing the transaction processing business that other regional networks consider their bread and butter. Its annual operating budget, before payout of dividends, is $24 million - considerably less than those of its peers.

Mr. Congemi "operates a leaner ship and looks to get things done through outside help, probably more than other networks," said Stephen P. White, managing director in the Atlanta office of Dove Associates Boston-based consulting firm, .

"When you look at his volume, he can command some pretty good deals," said Mr. White.

The network is in the 11th year of a processing partnership with Deluxe Data Systems Inc., a subsidiary of St. Paul-based Deluxe Corp., and the current contract runs for another four years.

Mr. Congemi declines to disclose what he pays Deluxe but insists that Star is competitive on price with other regional networks.

Deluxe Data performs the switching on all transactions within the network and takes care of most of Star's other technology needs. In fact, Deluxe, which operates a dedicated switch for Star, just completed a computer upgrade. Star officials estimate that with the current technology and even with the growing number of transactions, the switch is still only operating at 40% of its capacity.

"The reason we have remained outsourced is flexibility," said Mr. Congemi. "I don't have to worry about new hardware or software. We're already operating on technology that 90% of the networks are trying to get to.

"We can have a gateway installed in 45 to 60 days and turn one off tomorrow," he continued, referring to links built between Star's members and other regional and national networks. "Other networks take nine months.

"Starting about five years ago, organizations that did their own processing said organizations that did not would not survive. Well, if you take a look at our rates of growth, they are certainly no harbinger of a quickly approaching death."

Star operates on a not-for-profit basis and is owned by 16 financial institutions. Another 810 financial institutions are member-participants.

Despite its nonprofit status, Star makes money for its members - to the tune of more than $400 million in fee income annually.

And Star continues to add new locations to its network of ATMs and point of sale terminals.

"We've grown 28% in the first six months of this year and we expect to grow by 40% by December," said Mr. Congemi. He expects double-digit growth rates will continue well into the future.

"Our mission is to grow, and we will grow even more," he vowed. "We want to expand into geographic markets where we are not now strong, whether through adding new financial institutions as members, or through mergers or strategic alliances with other networks."

Mr. Congemi would not discuss any specific plans in this regard, and said with or without a merger, Star would continue to introduce new products and services.

'We determined that we need to diversify," said Mr. Congemi. "We chose not to get into some business lines like ATM-driving because there are so many people doing it already and we can't be price competitive.

"We decided to get into a business that others were not in."

To this end, the network recently formed a for-profit company to market a nationwide data base of check information that might help cut down on fraud.

The new company, Primary Payment Systems Inc., is at its core an expansion of what was previously known as Star Chek.

That program was limited to the western United States. Under the Primary Payment Systems umbrella and renamed Deposit Chek, the program will now be taken nationwide.

"The retailing community sees great value in what we are offering here," said Mr. Congemi. "And the retailing community is, of course, customers of the banks."

Mr. Congemi pointed out that many retailers routinely call banks to verify checks. "All we've done is put it all under one roof," he said.

Mr. Congemi will run the company, which has already signed contracts with Deluxe Data to use the outsourcer's Phoenix processing center as its central switch provider, and has elected a temporary slate of officers. Trials with two nationwide retailers are about to start.

The investor's business plan is now available, and Star hopes to attract four or five group owners - other electronic banking networks - as well as three or four individual financial institution owners.

Cash Station Inc., the Chicago-based regional network, has signed a letter of intent to become an owner. Cash Station's board has not yet voted approval.

The Houston-based Pulse network is also said to be interested, but officials there declined to comment.

"We certainly expect there to be interest from investors, but it's irrelevant. All of the services will be done anyway - for our own constituency," said Mr. Congemi. "There are so many derivatives to the value of this kind of system. We even have credit card companies asking if they can verify remittances through the system. It's clearly a much-needed service."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.