DENVER — Credit unions seeking to diversify and tailor their ATMstrategies were offered yet another possible alternative last weekas two industry players announced a new surcharge freeinitiative.

First Data Corp, the powerful payments processing firm, hasinked a deal with Allpoint, a leading provider of surcharge freeATM access that will allow participants in First Data's subsidiarySTAR Network to offer their cardholders surcharge-free access toAllpoint's surcharge-free ATMs nationwide.

Allpoint, a subsidiary of Cardtronics, the largest independentATM deployer in the country, has 32,000 ATMs nationwide availablefor surcharge-free access, mostly in convenience stores, gasstations and other retail locations. The STAR Network says it has5,400 participating financial institutions and industry analystsestimated that roughly half of those are credit unions.

The arrangement will immediately impact the relatively fewfinancial institutions that are already members of STARsf, the STARNetwork's surcharge-free option, but First Data hopes the move willattract far more institutions to join the surcharge-free network.STAR would not comment on exactly how many financial institutionsbelong to STARsf now, but did say that the network looked to thearrangement as a vehicle for expanding STARsf, particularly amongcredit unions and smaller community banks.

“We had been looking for some time for an appropriate nationalpartner that would help us expand STARsf beyond its long-term rootsin the regional networks which have merged with STAR over time,”explained Kirk Ergang, a senior vice president with First Data whohas a responsibility for STAR's Administration.

Ergang explained that STARsf had been linked together out ofsome of the regional networks that joined the STAR brand during theperiod of network consolidations and mergers. This had effectivelygiven STARsf a more patchwork sort of impact when looked atnationwide–stronger in some areas and not very available in others.The widespread Allpoint network offered a way to nationalize thenetwork, he added.

Currently STARsf is a fee-based option within STAR and Ergangsaid this would continue with the pricing system changed to reflectthe additional Allpoint machines. He would not go into the detailsof what the pricing might be, but said that he expected it would bedone in a way that would entice more credit union participationthan discourage it.

“Obviously from our point of view we want as many of STAR'sparticipants as possible to be able to use the network, so it's inour interest to price it in ways which further participation,”Ergang added.

Ben Psillas, president of Allpoint said, he expected the movewould sharply change some local markets for ATM access as communitybanks and credit unions in those markets suddenly found they had amuch more open road to providing their cardholders surcharge-freeATM access.

In particular, Psillas noted that the deal makes STARsf moreattractive as financial institutions question their policies ofoffering their cardholders surcharge-free ATM access simply byrebating them the fees they incur for using foreign ATMs.

“In light of what Bank of America's announcement signals, thenotion of open ended rebating of cardholder fees makes our optionlook pretty good by comparison,” Psillas argued, pointing out thatgoing with STARsf and Allpoint offers financial institutions a waythey can fix the cost of providing surcharge-free access whilerebating fees could leave with a steadily rising cost.

Bank of America announced early this summer that it will startcharging non-depositors $3.00 to make withdrawals from its ATMs inmost of the larger U.S. markets. Some industry analysts have seenthe move as signaling a rise in ATM surcharges around the countryas other financial institutions move their rates higher aswell.

CO-OP Financial Services, the parent CUSO for the CO-OP network,the largest credit union-owned surcharge-free network in the U.S.,didn't comment officially on the move, but CO-OP Executive VicePresident Jim Hanisch said CO-OP wasn't too concerned about themove.

“The fact is that when we look at the business models, we arereally talking about apples and oranges here,” Hanisch said. “Oneis a cooperative effort where credit unions are seeking to helpother credit unions offer better access for their members at a verycompetitive and attractive price,” Hanisch explained. “And theother is a means of offering surcharge-free access but in a verygo-it-alone sort of way.”

Hanisch noted that CO-OP already has participating financialinstitutions that also participate in Allpoint and said that thecooperative had seen for some time that each credit union was goingto have to craft the strategy that best served its members and itsown financial circumstances.

He noted for example that transaction volumes indicate that mostcredit union members feel more comfortable approaching an ATM thatis located in a credit union branch, even when it is not their own,over approaching an ATM in a retail location. And the growingaccessibility of Check 21 eligibility, he noted, would make CO-OPNetwork's deposit taking ability an even more important factor.

He also observed that CUs, which sign up with CO-OP Network, areable to offer their members nationwide surcharge-free ATM accesswithout having to give up all their other ATM surcharge income.

Almost all CO-OP Network participating institutions stillreceive surcharge income from their ATMs, he said, but they aresimply to forsake the surcharge income from the smaller number oftransactions from other CO-OP CU members in exchange for their ownmembers getting the same treatment. “It's just a different model,”Hanisch said.

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