Mr. Chairman, in preparation for this hearing, I tried to learn of as much credit union participation in ATM networks as possible. This was done by contacting our regional offices, credit union trade associations, and researching EFT publications. Our agency does not collect specific information on ATM activities from the credit unions we supervise. Since 1980, Federal credit unions have been permitted to make their own decisions regarding the use of ATMs or participation in ATM networks. Prior to that, NCUA monitored credit union participation in a series of pilot programs. This former approach was adopted in 1974 at a time when EFT programs were developmental and little was known about their probable effect on participating credit unions. Based on the experience of this six-year period, the NCUA Board concluded that Federal credit unions would no longer need prior approval of shared or proprietary ATMs. To date this policy has caused no regulatory problems and has afforded Federal credit unions maximum flexibility in selecting and developing electronic financial systems best suited for their membership.

It was not possible for us to secure aggregate data on all credit union participation in shared ATM systems. However, there is little doubt that such participation is widespread and growing very rapidly. Our regions report that planning by credit unions for future participation is standard for all those located near existing local networks. Many other credit unions are exploring the advantages of the seven national networks including the possiblity of large scale credit union particpation in a single

net.

In one survey of 50 bank networks which

examined, there

was credit union participation in approximately one-half of the

networks.

Another area of widespread planning for ATM networks is occuring within the Department of Defense and concerns the many credit unions serving military installations across this country and overseas. Efforts are underway to permit military personnel to access their funds from any installation.

Some credit unions, such as Alaska USA, have started their own networks which are also shared by other financial institutions. The Alaska USA system, operating out of Anchorage, presently has 28 ATMs and includes two commercial banks among its members. With plans for significant expansion, this network indicated that it was important that the options for sharing between all types of financial institutions be maintained.

As another example of credit union participation in the ATM field, I would cite the Construction Employees Federal Credit Union of Peoria, Illinois which belongs to an ATM network with three credit unions, seven savings and loan associations, and 12 commercial banks. If the national banks had to drop out of the system, not only would the convenient locations of the banks be lost, but the costs to the remaining members would escalate prohibitively.

A communication on this subject from the Pennsylvania Credit Union League reveals that there are more than 30 credit unions in Pennsylvania which belong to a shared ATM network and many others have indicated interest in participating in the near future.

Most of these credit unions cannot afford to purchase an ATM and, therefore, greatly rely on ATMs owned by other institutions. Without shared systems, the League indicates that credit unions would experience great difficulty in planning for such future services as ATMs, point-of-sale, and home banking which are viewed as vital for future credit union members.

As far as credit unions are concerned, Mr. Chairman, the provisions of S. 2898 are extremely important; not only in terms of today's operations, but more importantly in keeping alive the dynamic nature of the planning for the future. The potential for only limited participation by national banks would seriously jeopardize the possibility of achieving cost effective ATM services for all consumers.

With respect to the changes proposed by the Conference of State Bank Supervisors, I am not aware of the need for such further restrictions as set forth in the proposed language. Unless there is a particular existing problem, of which I am not aware, then

S. 2898.

would prefer to see enacted the present language of

This concludes my testimony. I will be glad to address any questions from the Committee.

Senator TRIBLE. Mr. Sebastian, I thank you very much.

We have been joined by my distinguished colleague from the State of Washington, Senator Gorton. Senator Gorton, would you care to ask questions of these witnesses?

Senator GORTON. No questions, Mr. Chairman.

Senator TRIBLE. Senator Gorton led our deliberations yesterday. My questions have been fully anticipated by your testimony here today. I think you have demonstrated the far-reaching impact of this decision and have sketched the potentially adverse effects on a host of important activities. This decision could very well shrink, or decrease the number of, shared networks and, as you pointed out, that will retard technological development and the hopes for cost reduction in the days ahead and will have a very direct impact on smaller financial institutions and their ability to participate and provide these kinds of services. This is not just a banking matter in the narrow sense of that term, but affects a host of financial services provided by savings and loans and credit unions through shared ATM's as well.

So, gentlemen, I thank you for your presence today.

Mr. BRUMBAUGH. Thank you.

Mr. SEBASTIAN. Thank you.

Senator TRIBLE. The next panel consists of Mark Hannaford, president, Bank Card Holders of America; and Michelle Meier, director of government relations, Consumers Union. Since Mr. Hannaford is not here yet, why don't we just pass over this panel and we will go to the third panel. Let us begin with the third panel and then we will quickly move to our second panel.

Welcome, gentlemen. We have Hardy Nathan, director of government relations, Food Marketing Institute, and Phil Gasteyer, senior vice president and legislative counsel, U.S. League of Savings Institutions.

Gentlemen, you are most welcome. As you heard me say, your testimony will be made part of the record in its entirety and you are invited to summarize those remarks or give them all if you care to do so.

Mr. Nathan, you may proceed.

STATEMENT OF HARDY L. NATHAN, DIRECTOR OF GOVERNMENT RELATIONS, FOOD MARKETING INSTITUTE

Mr. NATHAN. Thank you, Senator.

I am Hardy Nathan, director of government relations of the Food Marketing Institute. I'd like to start off by saying that the food retailers do pride themselves on their roles as purchasing agents for the public. Because of this, we are an industry that is consumer driven. Many of the things you see happening in supermarkets now, the changes that are taking place in formats, larger stores, more services being offered, the emphasis on fresh produce, that type of thing, are all in response to the desires of consumers.

We spend a great deal of time and effort as a trade association, as well as individual companies, in finding out what the consumer wants and then trying to give it to them.

We operate on a very narrow margin so it's important that our member companies are right in their estimate of what customers want.

You see, for example, such things as the phenomenon of a small chain, Wegman's comes to mind, opening an 80,000-square-foot store which is bigger than anything we have in the Washington area, in a town as small as Canandaigua, NY, with a population of 10,500.

SUPERMARKETS' ROLE LIKE FRIENDLY NEIGHBORHOOD BANK

Allow me to point out, Mr. Chairman, that supermarkets have operated as though they were the friendly neighborhood bank for many decades. Long before the expansion of branch banking and debates about banking deregulation, it was at the supermarkets where shoppers cashed their paychecks, wrote a check for cash on the weekend, and paid for their purchases with a check for $25 more than the purchase cost. We have just completed a research project on the cost of handling checks and cash. It shows for an average supermarket doing a volume of $10 million annually, which is about the volume done in an average good sized store, 3,600 checks are cashed weekly. That's over 187,000 checks a year per store. Our members operate approximately 17,000 stores which means they cash about 3 billion checks a year. There are about 29,000 supermarkets in the United States altogether, using the generally accepted definition of the supermarket as a grocery store, that do over $2 million worth of business a year. So, as an industry, supermarkets cash over 5 billion checks a year.

The annual report of the Federal Reserve Board for 1983 indicates that if you exclude Government checks and postal orders, almost 16 billion checks were cleared in 1982. That means that approximately 32 percent of all the nongovernmental checks cashed in this country are cashed in supermarkets.

Our research further indicates the average check is written for $46. Without doing the multiplication, there's a lot of money involved in that.

It costs our members approximately 42 cents to handle each check transaction and all of this is done at essentially no charge to the customer. It's done because that's the service that the customers want.

In the last few years our customers have been telling us something new. They have told us that they like to do electronic banking while they are in their supermarket. The result has been predictable for a customer driven business. Our members have been installing all kinds of electronic equipment in their stores, many different kinds, many different varieties of ATM's, and increasingly are trying to develop point-of-sale networks.

The hardware may be owned by the retailer, by a bank, by a network, jointly owned, leased, rented, or simply given space in a store for a flat fee. The growth of the ATM machines has been phenomenal. In 1982, 4.5 percent of all supermarkets had ATM's in them. In 1983, the number had increased to 8.4 percent. We have an early indication that the rate of growth, if anything, is itself increasing. In certain areas, particularly in western Pennsylvania and Mary