Members of the Senate Banking Committee, my name is John G. Bascom and it is a pleasure to meet with you this morning in my (capacity as President of Magic Line, Inc., a regional electronic funds transfer network headquartered in Dearborn, Michigan. I understand that t the Committee has been engaged in an ongoing discussion of financial services delivery in the United States, and in particular automated teller machine service delivery. 1 hope that my remarks today will provide you with insights on the role of electronic funds transfer networks such as Magic Line in making such services available.
By way of background, wide spread ATM deployment by financial institutions began in the early 1970s. By the mid to late 1970s, networks began to be established to allow the sharing of ATMS by cardholders of various financial. institutions. Among the roles of these early networks were the transmission, or "switching", of financial and related data between the ATM being accessed by a cardholders and that cardholder's depository institution to support the completion of a cash withdrawal. Additional roles included providing education, information, training, operational support, financial settlement, reporting and marketing support to facilitate ATM transactions. These roles remain today.
To provide additional perspective on my remarks, Magic Line was formed in 1979 and incorporated in 1981. We serve participating financial institutions primarily in Michigan, Illinois, Indiana, Ohio and Kentucky, and to a lesser extent in nine other states. We have approximately one thousand financial institution members and handle approximately fourteen million transactions monthly. While we are an important supplier of electronic funds transfer services in the Midwest, by most standards we are a small business, with less than eighty employees and total revenue of approximately twenty five million dollars annually. To better acquaint the Committee Members with our company, I am providing your staff with our recently completed 1997 Annual Report, which includes additional information.
Contrasted to the original roles of ATM networks, the business of Magic Line and some other networks has changed dramatically. Today we support a vast array of technology driven services, such as ATM "terminal driving", point of sale debit payment processing, personal computer based home banking services, "smart card" transactions achieved through a computer chip imbedded in the card, Internet web sites and many, many more. Frequently the users of these high-tech value added services are smaller, community oriented banks, credit unions and thrifts. With internally owned computer systems maintained for the benefit of our members, there are ongoing requirements for capital to invest in new technology and assure reliable delivery.
The competition for all of our services is intense. The market areas of Magic Line and other networks overlap. Daily we are competing with familiar network names such as MAC, Jeannie, Tyme, Cash Station, Plus, Cirrus, Shazam, BankMate and others. Additionally, large corporations that are not owned by insured depository institutions, such as EDS, FiServe, Deluxe Data and others offer some or all of the same services to the same market place.
We believe that electronic commerce, represented by the types of services we offer, is a powerful emerging trend that will affect the evolution of the financial services industry. Consumers today are technologically savvy, having achieved in unprecedented numbers both knowledge and comfort in dealing with personal computers in their homes, workplaces and classrooms. This has resulted in a demand for convenience and technology based self access, twenty four hours a day. All types of services, from stock trades to retirement planning through credit card applications, are being accessed through new technology.
Experience has consistent) y shown that the best way to assure the availability of services and new
technologies is through the operation of the free market system. We believe that the markets reward
innovation, investment, risk taking and competition. We further believe that legislation and regulation
intended to assure that users of electronic services will have low cost access are counterproductive in
terms of the impact on the well being of the consumer. The free market has and is resulting in increased
ATM deployment, new payment system technology development and intensified competition, providing
the consuming public with greater choice and value.
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