In a decision acknowledging that electronic payments are transforming the cash management market, Bank of America Corp. plans to reorganize its corporate-banking division, and has named a well-known automated clearing house veteran to head a new business unit.
B of A's payment and receipt units have always been managed separately, which made sense when they both handled paper payments. But as business customers shift to electronic remittances, which can be sent and received with the same systems, that separation has become less effective.
"The distinctions between the receipts businesses and the payments businesses have really blurred," said Skip Heaps, the global product management executive in the Charlotte company's Global Treasury Services division.
Banks have begun converting paper checks into images that can be processed electronically, or using the accounts receivable conversion format to turn consumer checks into ACH transactions.
There are plans to let some business checks be run through the ARC process as well, beginning in September, and to let merchants do so in their own back offices, though Nacha, the electronic payments association, has not said when this option could be available.
Mr. Heaps said all these electronic methods are speeding up payments settlement and are prompting businesses to seek out electronic cash management services. Banks' business customers are no longer "looking for a receipts solution and a payments solution," he said. "They're looking for an image solution."
Bank of America announced last week that it will combine the payment and receipt units into a Payments and Receipts Product Management Group to be run by Leonard J. Heckwolf. The group will be part of Mr. Heaps' division. Two other treasury units, liquidity management and international services, will remain separate.
Mr. Heckwolf was a senior vice president and the global head of ACH and retail lockbox at JPMorgan Chase. He left Feb. 9 and is to join B of A March 6, working out of Baltimore and overseeing product management and development for all U.S. payments and receipts products. A spokeswoman said Thursday that he was on vacation and could not be reached.
Mr. Heaps, who works out of Boston, said Mr. Heckwolf will help B of A develop products for markets such as health care and integrate card-oriented products into B of A's treasury offerings. Purchasing cards, for example, are a fast-growing payment mechanism for corporate customers.
Recent B of A acquisitions - of the card issuer MBNA Corp. last month and of the merchant acquirer National Processing Inc. and the card-technology business of Works Inc. in October - have given it great resources to offer business customers, Mr. Heaps said. Mr. Heckwolf will "bring all of that kit together to provide more innovative solutions, end-to-end solutions, to our corporate clients," he said.
Bank of America's Global Treasury Services division had revenue of $6 billion in 2005. B of A and JPMorgan Chase can both boast leadership positions in cash management.
Lawrence Forman, the associate director of the national cash management practice at Ernst & Young, confirmed that B of A is the top provider in the accounting firm's annual survey. But that survey covers only some of the worldwide treasury services that Bank of America and JPM provide, Mr. Forman said. "Both of them are able to claim No. 1 in various ways."
Mr. Heckwolf is a noted specialist in ACH and retail lockbox operations. He spent 23 years at JPMorgan Chase, Bank One Corp., and Chase Manhattan Bank and was Nacha's chairman in 2003 and 2004. He told American Banker in December 2004 that the ACH network would become more important in corporate payments.
"We need a high-quality business-to-business electronic payment system," Mr. Heckwolf said at the time. "That's what people need to focus on for the next three to five years."
Maggie Scarborough, a senior analyst at Financial Insights Inc. in Framingham, Mass., said that with traditional check payments in decline, "there's a lot of pressure on the business models of" banks that offer cash management services, "and nobody has more at stake than those with significant mass" - such as Bank of America. "You can take advantage of the scale economies and change the game, or at least influence it."
Susan Feinberg, a senior analyst in the wholesale banking group with MasterCard International's TowerGroup, said it makes sense for B of A to put its payments and receivables in one organization.
"Someone who doesn't come from NationsBank or Fleet can take a fresh perspective on what they are doing," Ms. Feinberg said. "Bringing in someone of Len's stature in to head it up is certainly making a statement to the industry."
