While financial institutions over time have relinquished ever greater control of EFT networks to third-party processors, largely because bankers did not consider funds transfer a part of their core business, it now appears the trend may be reversing, with FIs taking greater control over their network destinies.
Several networks have restructured to, at least in theory, offer FIs greater say and control.
"The networks now want to demonstrate a competitive advantage to FI customers. So what you see is networks creating formal structure to give customers more input," said Les Riedl, executive vice-president of Speer & Associates consulting firm. "Before this type of structure, [FIs] may not have thought their voice was loud enough."
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Fiserv, for instance, created a 16-member advisory council comprising 15 FI members and one Fiserv representative for its Accel/Exchange network.
"We established a governance structure in which members have the authority and are confident with us owning the majority of the network," said Kevin Gregoire, Fiserv's senior vice president of products and networks. "We strongly believe the model we have, with authority resting with our members, is the best model."
Visa and MasterCard appear to see the changing environment as an opportunity to compete more directly with regional networks.
"Some FIs think they don't need EFT network membership at all. They get that from Visa and MasterCard, who may have convinced banks to drop membership completely," Riedl said. "Look at some of the large banks; they went with Visa. This absolutely impacts the EFT networks."
Wells Fargo and Bank of America both pulled out of Star in 2003, giving their ATM and debit business to Visa instead.
Riedl believes increased competition between Visa/MasterCard and regional networks is positive.
"If there's bidding between Star and Visa for an FI's business, the FI stands to gain the most. Because when you're negotiating prices and there's competition, there's only one direction the price will go," he said.
