Like the hardware store that called itself "the world's most unusual lumberyard," Travelers Express Co. might well be the most unusual financial services company.
Long a leader in processing official checks, money orders, and credit union share drafts, the Minneapolis company has ventured through acquisitions into in-person utility payments, rebate checks, and gift certificates.
Its latest and most vigorous push is in a direction very different from its paper-laden past: remote electronic bill payment.
"This company has carved out some interesting niches," said chief executive officer Philip W. Milne, 38. He joined it because "I felt there was a tremendous amount of potential," he said.
Lured away from Citicorp's cash management business in 1991, Mr. Milne came in as general manager of the official check division. He rose to president and CEO last September.
In a business defined by economies of scale, Travelers Express has paradoxically prospered in niches that other types of processors shunned and is finding its way to higher technologies.
Through a string of acquisitions and alliances-including a partnership announced last week to handle bill payments for banks working with Arksys, formerly Arkansas Systems Inc.-the company has become, in less than two years, second only to Checkfree Corp. in processing electronic payments.
"We're in this to win," Mr. Milne vowed.
Travelers has assembled a network of 4,500 financial institutions that use its official checks and share drafts, 16,000 agents that receive in- person utility and other bill payments, and 45,000 retail outlets and convenience stores that sell money orders.
Travelers hopes Moneyline Express, the electronic bill payment program, will be its next star. Since the October 1995 acquisition of PayMate Inc., the company has signed 522 mostly small financial institutions to offer its service through technology intermediaries, including M&I Data Services, NCR, Destiny Software, Digital Insight, and Goldleaf Technology.
"They realized there is an opportunity and were not afraid of an entrenched player like Checkfree," said Paul Fiore of Camarillo, Calif.- based Digital Insight, which has helped put more than 60 banks and credit unions on the Internet. "They clearly have an advantage in understanding risk management. They will go out and collect funds for bounced payments, which is a big advantage for the financial institution."
"They were able to get our first bank up in 60 days," said Greg Sackenheim, product manager for NCR's customer information services group, which offers telephone bill payment. "We found they had a community bank philosophy. There is an amount of spoon-feeding that has gone on, and we are delighted with that."
Founded in 1940, Travelers was acquired in 1965 by the Greyhound conglomerate. Phoenix-based Greyhound became Dial Corp. in 1991 and spun off all of its service-oriented divisions into what became Viad Corp. in August 1996.
Viad's revenues totaled $2.3 billion last year. Some $191 million of the total came from Travelers Express, up from $176 million in 1995, $140 million in 1994, and less than $120 million in 1991.
But though Travelers Express is not the largest of Viad's subsidiaries, it yields more profit than any other-$34 million last year, up about 80% from 1993.
In fact Robert H. Bohannon, chairman and CEO of Viad, preceded Mr. Milne at Travelers.
"When I was moved to Phoenix," Mr. Bohannon said, "and it came time to figure out who would replace me, I sought out Phil," who was vice president and general manager of retail operations.
"I told him, 'I'd like to offer you the job of running Travelers, but I have one question: Can you do a lot better job than I did?"
Mr. Bohannon said Mr. Milne paused for 20 seconds and said yes. "We knew we had the right person."
Travelers Express got its name from a section of railroad in New York State that it purchased to sell money orders there. Now primarily used by the lower-income and unbanked population, money orders have a venerable heritage.
"Most people didn't have checking accounts until after World War II," said Emory University banking professor George H. Benston. "If you had to make a payment through the mail or get a receipt, you went into a bank and got a bank check. Or you went into Western Union, and they'd wire it and give money out on the other end."
Such money transfers "date back to medieval times when merchants from Italy would travel to a trade fair in Germany to sell goods and didn't want to carry cash back," said Mr. Benston.
Travelers Express is consolidating what was a highly decentralized business. More than 400 of its 900 employees work in the 14-story headquarters in the Minneapolis suburb of St. Louis Park.
About 200 work in Lake Lillian, Minn., at Financial Services Management Corp., a rebate-check processor Travelers acquired in February.
Another 100 in Dallas are moving to headquarters. Many were holdovers from the company's January purchase of National Express, a regional money order business, from BancFirst Corp. of Oklahoma.
Closest to the heart of the company's paper-based business is its Brooklyn Center, Minn., processing center, which has about 200 employees working in shifts from 2:30 a.m. to 11 p.m.
Mark Kruempel, director of operations, said 1.6 million checks with a total value of almost $700 million go through the center on the average day. Peak days can bring 2.4 million checks worth almost $1 billion.
Mr. Milne is focused on electronic opportunities, he said, because less than 5% of the 750 million bill payments each year are processed electronically.
Even serving the unbanked, Travelers is moving deeper into this territory through its three-year-old BuyPay service, which lets customers make payments to 31 utilities at 2,000 walk-in locations.
The company is also rolling out a New York-based service purchased from NationsBank in May 1996 called FlashPay, which lets retail agents charge fees between 50 cents and $1 for transmitting payments to Nynex and Con Edison.
Those fees compare with the 30 cents to $1 that agents charge for Travelers money orders.
"If you believe a small fraction of what the growth projections are," Mr. Milne said, electronic payments "are going to be huge." Payment Systems Inc., a Tampa-based research organization, has projected that by 2005, 85% of households will be paying 80% of their bills electronically.
Not that Mr. Milne comes from a particularly technical background. On a chest in his office sits an old adding machine. And he routinely deferred technical questions about the bill payment product to David R. Roy, vice president of electronic bill payment.
But the CEO does have management of complex organizations in his blood. His father, Donald G. Milne, ran World Book Corp. in Chicago when the young Mr. Milne was growing up in suburban Wheaton, Ill.
He moved to the Twin Cities area to study economics at St. Olaf College in Northfield, Minn., graduated in 1981, and returned to Chicago to earn an MBA from the Keller Graduate School of Management in the fall of 1982.
Mr. Milne's first job out of business school was at First Chicago Corp., selling cash management products. He moved to Citibank in 1985.
"Things have changed a lot in the whole financial service arena," he said. "Bank products were sold via relationships, and now they are sold much more on the value.
"I don't think corporations are as tied to the relationship game. They are looking for the best product and the best value out there. That is what has given our company a lead."
