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Argentine networks look to link up

A fragile economy may get a boost when Argentina's two ATM networks link up, allowing citizens to transfer funds between banks affiliated with either Banelco or Red Link.

May 6, 2002

A final agreement between Argentina's two ATM networks is nearly complete, opening the way for citizens to transfer funds between banks associated with the rival networks for the first time.

Until the two networks finalize their link, Argentines continue to do their banking through financial institutions affiliated with Red Link or Banelco, but are unable to transfer funds from one network to the other. This means that paying bills electronically is possible only if the recipient is affiliated with the network matching the citizen's bank.

The integration process began a couple of years ago, when Banelco and Red Link began allowing clients from member banks of the other network to extract money and check balances. Today the two networks are cooperating even more closely.

Already, three of the 23 Banelco-affiliated banks offer fund transfer capability, and an official launch of the service on both networks, including 41 financial institutions affiliated with Red Link, is expected in mid-February, according to executives from both networks.

Relief from government limits

Turmoil in Argentina's government structure, including a partial deposit freeze imposed by former President Fernando de la Rua in December, left Argentine citizens anxious about their money and forced many to pay bills in cash.

The network agreement comes at an opportune time for Argentine people, many of whom are struggling to conduct daily financial affairs.

The deposit freeze, which limits the amount of cash individuals may withdraw, may have averted a complete breakdown of the country's financial system. Citizens were withdrawing massive amounts of cash, primarily because they lacked confidence in the government's ability to solve the economic crisis.

Today Argentines are shifting their personal financial transactions from cash to electronic banking channels, including the ATM and the Internet, due to the fact that these transactions were not included in the government's limits.

"Because of the deposit freeze the people have to use different mechanisms to move their money and that's why we believe there will be an interesting demand (for the new service)," Banelco commercial manager Horacio Barbagallo said, anticipating the move to electronic banking by citizens. He said the ability to move funds between the two networks will boost demand.

"With the new system I will be able to pay my utilities through transferring funds from my account in a Banelco member bank to the account of the company that is in charge of the utilities, and which has its account with a Red Link bank," Barbagallo said.

Jorge Miori, head of marketing and commercial planning for Red Link, said the network link-up "will greatly amplify the payment system in Argentina," adding that it will also "provide a better service and give added value to the Argentine banking client."

There will be no additional charges for transferring funds, Miori said, though member banks could choose to charge a fee for the new service.

Network details

The 3,500 ATMs controlled by Banelco are concentrated in Buenos Aires, home of private and international banks including

Citibank, BankBoston, BBVA Banco Frances (NYSE: BFR) and SCH (NYSE: STD) controlled Banco Rio (NYSE: BRS).

Red Link's 3,750 ATMs are spread throughout Argentine provinces, as many of its member banks are federal, provincial or former provincial banks. Red Link also counts as members other financial institutions such as credit card companies and pension fund administrators.

According to Banelco and Red Link, most of their member banks use NCR and Diebold machines.

Prediction: More ATMs

Observers of the banking industry in Argentina predict an increase in ATM usage in the troubled country.

"We expect the high levels of ATM transactions to continue or even increase," said a spokesperson from Argentina's second largest bank, Buenos Aires province bank Bapro.

Executives from Banelco and Red Link said that ATM transactions would remain at the high levels that were registered in December after the deposit freeze was imposed. In fact, some feel the government action pushed more citizens to try electronic banking.

"The conditions are the same and a lot of people who were hesitant to use electronic channels before have now discovered how convenient it is to use these instead of cash," said Red Link's Miori.

Although bank executives prefer to be cautious in these troubled days for the Argentine economy, the executives from both the networks believe that the banks will have to install more ATMs to meet the increased demand that the deposit freeze has provoked. Miori, in fact, predicts an increase of 30 percent to 40 percent in the number of ATMs.

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