It doesn't take a mind-reader to know what American Express executives must think about First Bank in Minneapolis.
The lead subsidiary of $26 billion-asset First Bank System has been the banking industry's most aggressive competitor against American Express in corporate charge cards.
First Bank said it provides cards and related management information services to more than 145 of the Fortune 500 companies, with more than 600,000 cards issued.
Building this business -- still a fraction of the Amex-dominated market -- was no easy feat.
The initial obstacle was a corporate image problem. Reeling from a write-off in its bond portfolio during the late 1980s, First Bank struggled for basic survival. Under a new management team, the bank was able to restore its capital and began exploring new initiatives, one set of which was in payment systems.
The Visa corporate product turned out to be an opportune vehicle.
"In the beginning, we really had to ride the Visa banner to gain recognition," said James Baumgartner, senior vice president of corporate payment systems.
"We weren't that well known, and to a certain extent, we still had to cope with the lingering bad press from the write-off problem and the fact we were a superregional, as opposed to a money-center, bank," he said.
When pitching new accounts, First Bank claims some advantages over American Express, such as in the number of card-accepting merchants. American Express has fewer than four million, while First Bank Visa can be used throughout the global card association's 11 million-location network.
Also, Mr. Baumgartner said, "By aligning with Visa, we are part of the world's largest cash advance system. Amex has to place individual machines or offices for their customers to access cash, whereas we can leverage all the bank branches in addition to the ATMs using Plus and Cirrus."
The acceptance issue becomes increasingly important as companies look for ways to lower travel and entertainment costs.
"Some of the low- to middle-market restaurants and hotels aren't prepared to pay the higher [American Express! discount rates and won't accept the card," Mr. Baumgartner said.
"Visa allows customers and employees a broader range of options as to where they spend their limited T&E dollars. With more options, average costs can be driven down."
First Bank has developed a set of proprietary information management tools that can provide a corporate customer with an in-depth analysis of employee travel habits and patterns.
This information can then be used as leverage in vendor relationships. For example, the bank could provide a client company with the names and locations of the hotels, airlines, and car rental companies that cardholding employees use. This information would enable that company to approach one of the travel entities and say, "We can bring 60% of our business to you in return for a lower rate."
Using the First Bank information tools, the client six months later can prove to a given vendor that it had redirected employees' travel dollars. And they get confirmation that the agreed-upon discounts were being charged.
"Controlling the information about the traveler is key to our success," Mr. Baumgartner said. "Being able to provide that information so that the customer can leverage vendor relationships is what we are all about. Without this capability, we run the risk of being just another commodity."
First Bank's MIS, or management information systems, enable clients to track travel activities by vendor, country, employee, and any combination of categories or subcategories, on weekly, monthly, or quarterly bases.
The bank can deliver the information on a computer disk, or, for those with lower-tech preferences, on hard copy.
Increasingly, First Bank clients prefer direct transmisssions into their own computer systems.
Unlike American Express, First Bank has no plans for multimillion-dollar advertising campaigns, choosing instead to put the resources into MIS development.
"MIS is what will make the difference for our clients," Mr. Baumgartner said. "We are widely known in the corporate world as First Bank Visa and there isn't a huge need to spend a lot on advertising."
First Bank also knows how to make money. By offering rebates and incentives to high-volume customers, First Bank offsets funding and other costs associated with a large portfolio.
"They've managed to carve out profits in a difficult market by charging special handling fees and by charging customers who don't pay right away a little more," said William Westervelt, a principal at First Annapolis consulting in Annapolis, Maryland.
In recent months, First Bank has introduced the First Bank Visa purchasing card, which streamlines the buying of office supplies and other routine business commodities.
It works this way: Company employees are given cards with spending controls and limited to certain merchants. A shopping spree at Neiman-Marcus, for example, would be automatically disapproved.
"We have it set up so that a company can order anything from paper clips to jet engines and eliminate paper in the process," said Mr. Baumgartner. "Eliminating paper is very attractive because processing a purchase order at Fortune 500 companies can cost from $30 to $120."
Increasing numbers of companies are signing up for the purchasing program, which grew by 500% in 1993.
The purchasing card requires acceptance by a type of merchant that typically has not taken bank cards. So First Bank has a dedicated staff signing up companies all over the country for Visa.
Mr. Baumgartner indicated that when First Bank System entered the corporate card business it was the 70th-largest merchant processor in the country. Today it is fifth.
Clients help sell the merchant business. A major consumer products company that recently signed up for the purchasing card gave First Bank a list of 40,000 vendors. First Bank sent out a welcoming letter inviting them to call a toll-free number to become Visa-capable.
The implicit message: Take Visa if you want to keep your status as a supplier.
