BancNet, Megalink merger in the works?

MANILA, Philippines - Talks for a possible merger between two of the country’s largest automated teller machine (ATM) networks are in the works, top officials said.

The two consortiums, BancNet and Megalink, together cover a sizable portion of the ATM environment including point-of-sale (POS) terminals and Internet banking.

Megalink chairman Nestor V. Tan said he sees the propriety and benefits of joining forces.

“We believe its better for all participants. It will also allow us to better manage the settlement risk exposure,” Tan, who is also president and chief executive officer of BDO Unibank Inc., told The STAR.

He said Bangko Sentral ng Pilipinas (BSP) Deputy Governor Nestor Espenilla  has earlier floated the idea of merging the ATM networks into one industry utility.

“We said we support the idea as it frees the bank of certain services thus allowing them to focus on their core business,” Tan said. “Let the experts do it under defined governance and business rules.”

BancNet executive vice president and chief operating officer Aristeo P. Zafra Jr. said that the merger simplifies delivery of services, regulations and coordination with government agencies, and coordination with other service providers like card experts.

As an example, Zafra cited the shift from magnetic swipe technology for cards to computer chip technology as required by global operators MasterCard and Visa.

Zafra explained that the computer chip technology is the global norm for cards, be it credit, debit or ATM cards. Thus, unified operations for ATM for examples simplifies the eventual shift to EMV.

“Right now, any problem arising from the use of magnetic cards, such as fraud, is the responsibility of the bank,” the BancNet executive said.

Former Bank of the Philippine Islands (BPI) president and chief executive officer Aurelio Luis R. Montinola III said that outsourcing certain banking services to more authoritative entities frees the banks to stick to their core business.

BPI has its own ATM operations known as Expressnet but in 2008, tapped BancNet as the switch operator.

“The Filipino banking public will benefit from two ATM switches for three networks, simplifying backroom operations and other activities related to running an ATM switch,” Montinola said at that time.

It is too early to tell whether the emergence of a single entity would result in lower transaction fees.

But both operators agree that it could lead to faster introduction of services and efficient services under the closer guidance of the regulators, known to be technology friendly.

ExpressNet was born in February 1986 when the ATMs of BPI and its subsidiary, BPI Family Savings Bank were connected. By 2001, the network included the Land Bank of the Philippines, Banco de Oro, BPI Direct Savings Bank, and HSBC Savings Bank.

MegaLink was formed in September 1989 when Equitable Banking Corp. (now merged with BDO), Far East Bank and Trust Co. (now part of BPI), Philippine National Bank, and United Coconut Planters Bank, linked all their ATMs.

BancNet was founded in July 1990 when the ATMs of eight banks – PCI Bank (now Banco de Oro), Security Banking Corp., China Banking Corp., Rizal Commercial Banking Corp. (RCBC), Allied Banking Corp., Metropolitan Bank & Trust Co. (Metrobank), International Corporate Bank (i-Bank now part of UnionBank), and CityTrust Banking Corp.(now part of BPI) were linked.

In October 2010, the three networks were finally interconnected under the prodding of the BSP.