In 1990, a grim time at First Bank System Inc. in Minneapolis, Philip G. Heasley approached his new boss with what sounded like a crazy proposition: to stake a claim in the corporate charge card market.

Despite encouragement from the MasterCard and Visa associations, few banks had given that business a thought, essentially conceding it to American Express Co.

Although First Bank was "11 heartbeats away from questionable solvency," as Mr. Heasley described it, he was able to convince the new chairman and chief executive officer, John F. Grundhofer, to "invest a fair amount of money in this effort."

The corporate card program started with a single client, Burlington Northern railroad, which has since merged with Santa Fe Pacific. The program was reviewed every five weeks. To Mr. Heasley's delight, "Jack stuck with it and it has actually returned multiples of the most optimistic projections we had for it."

First Bank, which acquired U.S. Bancorp of Portland, Ore., this summer and adopted its name, today enjoys what one analyst calls "a duopoly" with American Express in commercial cards. U.S. Bank is the largest issuer of Visa corporate and purchasing cards, and its clients include 144 of the Fortune 500.

The recent merger was a boon to Mr. Heasley's brainchild. As the deal was being consummated, he said, First Bank's card group signed up seven corporate clients of the "old" U.S. Bancorp.

The rest of the industry has finally come around to viewing corporate travel and entertainment cards, and their purchasing and small-business cousins, as hot opportunities. But the Minneapolis superregional does not view other banks as competitive threats.

"I think it would be fair to say we're larger than everybody else combined," said Mr. Heasley, who is vice chairman and president of U.S. Bancorp's retail product group.

Among U.S. Bancorp's bigger accounts are Northwest Airlines and Lockheed Martin. Others "run all the way from supermarkets up to Amway Corp.," Mr. Heasley said.

In the second quarter this year, First Bank System reported credit card fee revenue increased $12.9 million, or 17.6%, from a year earlier. It attributed the leap to higher volumes for both corporate credit cards and the cobranded Northwest Airlines WorldPerks card.

In early 1994, First Bank landed an exclusive contract to provide purchasing cards for the U.S. General Services Administration. "Taking on purchasing for the U.S. government absolutely cemented us in that business," Mr. Heasley said.

The federal contract is up for grabs at the end of this year, and the bidding is likely to be intense. U.S. Bancorp hopes it has gained an insider's advantage.

"We'll have spent over $100 million in bringing our systems and capability to the (government's) next procurement level," Mr. Heasley said.

Mr. Heasley, 48, began his career at Citicorp in 1974, after graduating from Marist College and Bernard Baruch Graduate School of Business in New York. When Citicorp, originally a MasterCard bank, wanted to take advantage of the new duality rules and issue Visa, "I ended up getting involved in signing them up with Visa," the banker said.

From 1982 to 1985, Mr. Heasley was president and chief operating officer of Citicorp Diners Club, then served as senior vice president of the consumer business group for two years. Richard Kovacevich, a former Citi colleague and now chairman of Norwest Corp., encouraged Mr. Heasley to think about moving to the Twin Cities.

He joined Norwest's archrival in 1987 and tried for three years to generate interest in corporate cards - until Mr. Grundhofer gave him the green light.

Once the program was under way, Mr. Heasley began shifting his focus from travel and entertainment - American Express' primary charge card domain - to purchasing cards that could "save a fortune" by streamlining companies' smaller-ticket payments, he said.

Mr. Heasley targeted manufacturing businesses in the heartland and set about differentiating his bank from American Express.

"Amex is a great card if you've got a white-table restaurant to go to," he said. "If you're working the rail in Montana or the Oil Patch, it's not necessarily for you. We wanted to zig when Amex was zagging, so we didn't go after the high-margin, high-glitz, let-your-client-pay-for-the-bill sector of the market."

American Express, he said, works well for "legal firms, consulting firms, advertising agencies - companies that don't care about controlling their T&E." U.S. Bancorp addresses those that want to pinch pennies.

"There are different psychologies out there, and we don't fit all of them," he said. "One of the precepts of getting into this business was that regional banks that really care about their local middle-market customers can service them better than somebody at a $100-a-square-foot skyscraper in Manhattan."

Card experts credit Mr. Heasley with foresight.

"First Bank started about three years ago building not just a card data base, but a consumer relationship data base that they see as providing the fundamentals for their business going forward," said Barbara Smiley, research director at Meridien Research, Needham, Mass. "Building such a data base takes a long time, and you hardly have anything to show for it for years. You don't see that level of commitment every day."

"Our game is a long game, not a short game," Mr. Heasley said. The philosophy also operates on the $11 billion consumer card portfolio: the bank eschews teaser rates and other gimmicks that might bring only short- term account gains.

Moshe Orenbuch, an analyst at Sanford C. Bernstein & Co. in New York, said Mr. Heasley has been "a bear on credit quality and credit cards forever. First Bank has long been looking at aspects of credit cards that were more geared toward the payments system than lending."

For now, Mr. Heasley said, all the fun is in business cards because the consumer card pie is not expanding. "If you're selling cards, you're swapping them, playing wallet-and-purse tag," he said.

"On the corporate side, there's a fair amount of growth. Companies are finding ways to produce significant financial rewards for themselves by updating their payments systems."

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