Harris Bank is planning a major expansion of its modest wholesale lockbox business to meet challenges from larger competitors.

Harris, a $24 billion-asset unit of Bank of Montreal, plans to add processing facilities in Dallas, Los Angeles, and Philadelphia, to existing operations in Chicago and Atlanta. Ultimately, it would electronically link its U.S. lockbox sites to Bank of Montreal's four processing points in Canada, reaching across North America.

With the cash management industry in a shakeout stage, banks like Harris must "make the next level of significant capital investment" to compete, said Anthony Carfang, partner at Treasury Strategies, a Chicago-based consulting firm.

Multistate corporations are moving to consolidate their wholesale lockboxes at one or two banks that can serve them nationally, rather than maintaining relationships with five or 10 institutions in different regions. Lockbox banks supply services such as speeding collections of payments and automatically reconciling accounts.

Although most cash management banks sell wholesale lockbox services, few have the commitment to building a national network, said Mr. Carfang.

Dennis Dean, senior vice president at Harris, said, "The network ... enables us to compete effectively against major national competitors." He did not disclose how much the bank plans to invest.

Its prominent lockbox competitors would include First Union Corp., BankAmerica Corp., NationsBank Corp., Mellon Bank Corp., and First Chicago Corp.

Harris Bank intends to bolster its national network with check and document imaging. The imaging service would let users have on-line access to real-time receivables data and see images of checks and images on the day of processing.

Imaging would "assist our clients in migrating from paper to electronics and provide what we consider to be a more valuable information product than what is currently available in the market," said Mr. Dean.

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