Shazam network puts staying power behind the lightening bolt

Northwestern Financial Review, Mar 1, 2001 by Crews, Jennifer Goepfert

Back in 1985, when its marketing firm told the board of directors of the Iowa Transfer System that the masses had spoken..that the people wanted the magenta lightening bolt instead of the green one, and that the company should officially change its name to Shazam, board members were reluctant. And who can blame them?

The idea of a serious financial services company sallying forth with a name and logo reminiscent of a superhero sounded a bit iffy. But the directors agreed to go ahead with the new marketing strategy because, after all, it was what the people wanted. And that is what the Shazam network is all about-giving the people what they want.

And it paid off The logo and catchy new title, along with a television spot, moved the electronic network into the realm of "household name" in the Midwest, increasing consumer recognition to 92 percent from a mere 36 percent. It was the first step in educating consumers on the topic of fast, convenient, electronic banking, an effort that has been an ongoing part of the company's mission since it began in 1976, when it was among the first to step into the field of electronic funds transfer.

Today, the Shazam network is one of the largest shared EFT networks in the Midwest, with $37 million in annual revenues, field offices in eight states and 1,515 participating institutions in 27 states. The network provides automated teller machines (ATM), point-of-sale and electronic benefits transfer (EBT) services, national debit products, merchant services, automated clearing house (ACH) services and Internet banking services. Shazam is the only member-owned network in the country that owns its own hardware and software.

"And we are debt free," declared Dale Dooley, president and CEO. "We have a very experienced staff and we own and operate our own hardware, which we think is the real benefit because we aren't relying on a third party software provider to make changes and to stay in business. With our system, we have control. We have staying power."

The Shazam network's solid 24-year history certainly proves its staying power-a history that Dooley has been a part of since the beginning.

Shazam began as the Iowa Transfer System, a not-for-profit organization instituted in response to a cry for help from commercial banks that were restricted from branching statewide. The state's unit banking environment prevented banks from conducting transactions off site. With the inception of the corporation, the ability for commercial and community banks to provide EFTs became a reality. The network grew, and in 1980, it was approached by credit unions and S&Ls about an opportunity to buy in. In 1981, a for-profit organization, ITS, Inc., was developed, with Iowa Transfer as the major share-holder. In 1984, Iowa Transfer, Iowa Automated Clearing House Assoc., and The Card Services Member Assoc. (CSMA), were consolidated, giving birth to the powerhouse Shazam network. A large part of the network's aim has been to work with community institutions to meet their electronic banking needs.

"Our mission calls for us to provide electronic banking to community financial institutions at an affordable price," said Dooley. "Many community banks couldn't do EFTs on their own. That is the basis for our existence. We will provide the lowest cost possible without compromising quality."

Point-of-sale is one example of how the Shazam network has provided a step-ladder for those community banks. Without the benefit of a network that provides the terminals and the expertise that would be required to operate them, community banks would have to turn to their competitors for point-of-sale. The same holds true for national debit cards. Many community institutions can't or aren't willing to provide them on their own. Shazam provides the technological infrastructure and the "back-room" infrastructure that alleviates a need to turn to the competition.

Dooley stressed the importance of the safety and soundness of the organization, which only provides services to institutions with insured deposits.

Oh, sure, in terms of raw volume, Shazam may look like a small network. But in terms of the wide array of products offered, the revenue stream is significant. And with a deployment of 5,116 ATMs, a point-of-- sale deployment of 86,397, more than 10,000 merchant locations and just under $1 billion in annual merchants' business, the Shazam network is giving the larger networks a run for their money.

Now the Shazam network is trying to widen the reach of that lightening bolt. "We want to get the message across that we are not just an Iowa-based company," Dooley said. "Only 40 percent of our volume actually comes from Iowa. That means 60 percent comes from financial institutions outside of Iowa. We have to educate those financial institutions in other states on what type of organization we are."

Although the company has seen tremendous growth recently, it is far from leveling off. "We will continue to grow our core business throughout the Midwest," said Dooley. "And we will try to improve on a continued basis to make our processes as efficient as possible."