In an attempt to create a unifying element for its financial services units, BB&T Corp. has created a division focused solely on payments.
For BB&T, which is strong in both banking and insurance, payments is an opportunity to link businesses that often function separately. The division will draw on the $107 billion-asset company's other units to come up with new products and services, and BB&T sees it helping customer acquisition and retention.
The Winston-Salem, N.C., banking company announced the payments services division Monday and named Bennett Bradley, an executive vice president, to run it.
"Payments is becoming increasingly important, to BB&T and to the industry," Mr. Bennett said. "Payments has a lot to do with shaping the banking experience for customers. It has to do with how people access their funds, how they make purchases, and how they get paid."
He said BB&T is making the change now because it hopes that putting its payments businesses under one corporate roof will streamline operations and lead to cost savings and increased revenue opportunities. One goal is to expand Payroll Services Corp.'s offerings to include insurance and other benefits services.
More banks are starting to recognize the importance of helping customers deploy their funds. And Mr. Bennett pointed out that payments has changed dramatically as electronic systems have replaced paper-based processes. Consumer bill payments, once done primarily with paper checks, can now be initiated online or made with credit cards. Corporate remittances can be made by wire transfer or through the automated clearing house system.
All these changes present banks an opportunity to generate new types of for-fee services. BB&T hopes to leverage its payments services to increase its top-line revenue, Mr. Bennett said.
"Payments are becoming more complex," he said. "We made this shift with an eye to the future."
Along with the payroll subsidiary, the payments division will also include BB&T's ACH and wire transfer businesses; debit and prepaid cards; bill payment; treasury management services; Creative Payments Solutions Inc.; and Mid-America Gift Certificate Co.
Gwenn Bezard, a research director for the Boston market research firm Aite Group LLC, said that many banks recognize the revenue potential of payments but that few have payments-dedicated divisions.
"BB&T has, over the past few years, been at the forefront of creating a complete payments strategy for the bank," Mr. Bezard said. It is "one of the most sophisticated banks at assessing the value of payments."
That is borne out by the Creative Payments Solutions, formed in 2003. It was one of the early promoters last year of remote-capture image systems for corporate customers, and remote capture has become one of 2005's most popular image services.
Another thing about payments: "You don't necessarily have to be a big national bank to be a strong player in payments," Mr. Bezard said. For example, Marshall & Ilsley Corp. of Milwaukee has assets of $45 billion but owns one of the top banking technology companies, Metavante Corp. "Payments helps M&I differentiate their business," Mr. Bezard said.
Payments is generally said to account for about 40% of banks' noninterest revenue, and Mr. Bennett said "for BB&T, that's in the ballpark."
Mr. Bezard said:, "Even if you sit back and relax, payment volume will increase because the population is growing and so is demand for electronic payments. It's a growing business whether or not you do a good job," he said.
By dedicating an entire division to payments, Mr. Bezard said, BB&T will probably be able to develop new payments-related services - and charge fees for them. "The more fee income you can generate, the better," he said. "Banks love that."
