NEW YORK -- 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 a 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 replaced completely in this decade by national networks such as those run by Plus System Inc. and MasterCard's Cirrus System Inc. But most said that they believe a handful of regionals will survive.
Of the 75 to 80 shared networks, perhaps 20 of the most aggressive and innovative will remain after five years, observers said.
Non-bank competition also 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 would allow the "Baby Bells" to enter the ATM switching business.
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 like the one proposed by NCNB Corp. and C&S/Sovran Corp. The merged company may find it makes little sense to belong to multiple networks.
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. "The larger players have the biggest voice in what goes on," he said.
In-market mergers such as the one proposed between BankAmerica Corp. and Security Pacific Corp. probably would not force further consolidation, he said.