FDC: Star Expects to Counter Fiercer Rivalry in EFT Networking

Now that Metavante Corp. has closed on its acquisition of the NYCE electronic funds network and First Data Corp. has put its acquisition and integration of Concord EFS Inc. and its Star Systems network behind it, look for competition among the remaining regional EFT networks to become even more intense, says an executive at FDC. The Denver-based processing giant, which has been absorbed with issues surrounding the integration of Star, now says the network is ready to come out swinging. “When you go through a merger, you're distracted,” says Rodney Bell, vice president of corporate communications at FDC. “Now we're beyond that. Now you'll see more of the usual energetic marketing from Star. The competition is going to be very energetic and robust.” Many observers expect Star to target the banks in NYCE, most particularly the four big banks that, until Metavante's acquisition, owned the network with FDC: Bank of America Corp., Citigroup Inc., HSBC Holdings PLC, and J.P. Morgan Chase & Co. Some would say the competition in ATM and point-of-sale debit is fiercely competitive already. Star, for example lost two major issuers last year to Visa USA's Interlink network. Well Fargo & Co. and Wachovia Corp. were reportedly lured away by Interlink's higher interchange pricing. And NYCE in January sued Star over what it alleges is a breach of an 11-year-old agreement on transaction routing. But FDC's Bell says many network executives focused on internal matters pending the resolution of the U.S. Department of Justice's case against FDC over its proposed acquisition of Concord. The resolution of that case came in December and resulted in FDC's February acquisition of Concord and its later divestiture of its 64% interest in NYCE. Now, says Bell, Star is ready to commit resources to heavy-duty product development and marketing, and so are rival networks. “A lot of other players are sensing the need to get active again,” he says. “There were some players sitting on the sidelines [awaiting the outcome of the DOJ-FDC case]. Now they're saying it's time to get off the sidelines and back in the game.” In Star's case, Bell says, this will include heavier emphasis on new products like Star Chek Direct, which offers real-time authentication and debiting of funds for checks (Digital Transactions News, April 9) and bill payments linked to personal identification numbers. One of the biggest questions in EFT circles?how committed the NYCE issuing banks are to NYCE in the wake of Metavante's purchase of the network?remains unanswered. Metavante refuses to comment on the arrangements it makes with clients. But the situation clearly presents opportunity to both Star and Pulse EFT Association, the only one of the major regional EFT systems still owned by its bank participants. Do they have the NYCE banks in their cross-hairs? Neither one is saying. “I don't want my competitors to know any details,” says Bell. At Houston-based Pulse, which last October began processing transactions on a new in-house switch, officials will only say they see competitive opportunities in the ownership change at NYCE. “Wherever there's change, it breeds opportunity,” says Cindy Ballard, executive vice president at Pulse. “We believe we have opportunities across the board.”