Analysts: ATM Networks Will Face Consolidation
Regional networks of automated teller machines, the fastest-growing segment of the electronic-banking business in the 1980s, face what could be a Darwinian struggle for survival in the 1990s.
The business climate is being reshaped by the recent spate of bank mega-mergers, which is expected to intensify, and growing competitive pressures among banks, networks and technology companies.
The changes are forcing banking companies that own regional ATM networks to consider whether their franchises have reached maximum value and, if so, to contemplate mergers or sales of their stakes.
“We’ve seen smaller networks bought by larger ones,” said Ron Dennis, a consultant at Speer & Associates in Atlanta. “Now, we’re seeing the larger networks being bought.”
A few bankers said that regional ATM sharing arrangements will be completely replaced in this decade by national networks such as those run by Plus Systems Inc. But most said they believe a handful of regionals will survive.
On Tuesday, Plus President D. Dale Browning announced that Visa U.S.A. was negotiating to acquire, control of Plus. San Mateo, Calif-based Visa acquired a third of Denver-based Plus in 1987 for $3.5 million.
Of the 75 to 80 shared networks, perhaps 20 of the most aggressive and innovative will remain after five years, observers said.
And as with the financial services industry in general, non-bank competition looms. New competitors for bank processors of ATM transactions may rear their heads in the form of the regional Bell telephone companies; a recent court ruling allowed the so-called Baby Bells to enter the ATM switching business.
The most recent example of such competitive pressures was Core-States Financial Corp.’s discussion of an offer from its former chief operating officer and chief financial officer to buy its MAC ATM network for about $400 million.
Core-States ultimately rejected the overture and is unlikely to pursue a buyer, observers said. But the talks pointed up the divergent visions of regional network franchises taking shape among banks that own networks.
During his tenure at Core-States, Bipin Shah, the former chief operating officer, was known to advocate emphasizing transaction-processing businesses over traditional banking services, but Core-States’ chief executive, Terrence Larson, disagreed.
The pace of ATM network consolidation is also being driven by the recent rash of big bank mergers, observers said, especially those that cross state lines such as the one proposed by NCNB Corp. and C&S;/Sovran Corp.
C&S;/Sovran, for example, is in both the Most and Honor networks. “I would not be surprised if Most and Honor look at merging,” said Thomas Bennion, president of Southeast Switch Inc. of Maitland, Fla., which runs the Honor network. The two systems have talked, he said, but not enough big banks were in both networks then.
