Computer cash will now bail you out across US
Interstate banking has moved one electronic step further into reality.
Twenty-six of the nation's banks, including four of the largest, have banded together to form a new company, called Plus System Inc. It will provide shared services, nationwide, of automated teller machines (ATM). Within a year, for example, a Chicagoan visiting New York will be able to do almost all of his banking from New York - or any other of the 26 regions - on an ATM.
The machines, which have become widespread at local banks, allow the transfer and withdrawal of funds and electronic inquiry concerning balances. This will be the first time the machines will be used nationally by the banking system to transfer money.
According to D. Dale Browning, president of the new company, within the next 24 months some 25 million households will be able to use the nationwide system. ''We expect as many as 4,000 ATMs available to the banking public by mid-1983 and 10,000 by 1987,'' he said. Mr. Browning also said in an interview that he expected 3,000 banks to join Plus System within the next 18 to 24 months. These banks will be ''sponsored'' to use the system by the 26 original banks, which are equal shareholders in the new company.
The banks have set up the new organization in response to what they perceive as a growing challenge from nonbanking financial service organizations.
For example, Sears, Roebuck, the large retailer, which is moving into financial services, has said it intends to install ATMs at its various stores throughout the nation, allowing customers access to lines of credit. American Express likewise has ATMs which allow ''gold'' cardholders access to a line of credit.
A spokesman for American Express said the company looks forward to the possibility of working with the new national network. American Express gold cardholders now have access to ATMs used in the MPACT system, which is used by many large Texas banks. With the new Plus System, Visa and MasterCard holders from participating banks will be able to access any of the Plus ATMs.
Browning said the new system has not asked for any regulatory approval at this point. Rather, he said, it had ''preliminary'' discussions with the Justice Department because of the inclusion of several large banks in the system. He added, ''We intend to review the program with the Federal Reserve Board and the Comptroller of the Currency in subsequent meetings. We thought it was premature until we had a concrete program.''
The biggest hurdles faced by the new company, Browning said, involved security and privacy. Plus System has developed a new security system which keeps bank account information from being obtained through wiretapping, for example. Nor can an individual's private financial information be accessed by other banks, which might want to use it for marketing purposes. Browning said the security controls are ''elaborate.''
Each bank will make its own decision on how to offer the service. Some will not charge a customer for it. Others may require some form of minimum account level to allow access to it. In Colorado, for example, where the Plus System has been used statewide by Rocky Mountain BanCard System (RMBCS), most banks have not charged to use it. Currently, the Plus symbol is used on 320 ATMs in 12 states.
The new system will be the largest grouping of banks sharing ATM services to date. The banks that will be proprietary members include Chase Manhattan Bank in New York, Bank of America in California, and Continental Illinois National Bank in Chicago. Other large regional members include Southeast Bank in Miami, BancOhio Corporation, Philadelphia National Bank, Rainier National Bank in Seattle, National Bank of Atlanta, and North Carolina National Bank. All members are obligated to be on line within one year and to have the Plus logo on credit cards in 18 months.
The alliance of the nation's largest bank - Bank of America - and Chase, the No. 3 bank, may force Citibank, the nation's second largest, to enter a shared network as well, Richard M. Kovacevich, senior vice-president of Citibank U.S.A. , said in an interview. But he said that from a philolophical standpoint, he thought allowing pure competition in interstate banking was preferable. Furthermore, he thought banks ''can't be as innovative as they would like to be if they have to conform to someone else's network.''
Browning said he expected savings-and-loans and other thrift institutions to join the system. Competing institutions within the same banking areas are likewise expected. Analysts expect other nationwide ATM services to be formed in the next few months which will compete with Plus System.