Mining the EDI gold mine.

For corporate treasury managers, the vast majority of business-to-business bill paying today means simply writing checks, but with the advent of newer. electronic payment methods such as electronic data interchange and the automated clearing house network, companies are reassessing their accounts payable methods.

In considering their options for payment reengineering, corporations are finding that many administrative operations can be better served by others.

These companies are looking at their banks as outsourcers, and as a result, more EDI-capable cash management banks are scrambling to accommodate them.

While the technology for banks to process clients' payables has been around for some time, only recently have corporations looked to others for assistance with payables, said Mary Ann Francis, vice president and manager of electronic products at Clevelandbased National City Corp.

"From the business side, the concept of taking a piece of your business and giving it out was something that businesses had difficulty with," Ms. Francis said. "They feared losing control. But only in the last few years have people been willing to talk about it. They have become more open minded."

Though corporations may be more willing to outsource accounts payable, they also are realizing not many banks have the electronic data interchange, or EDI, capability to meet their needs, said Edward Valenzuela, vice president and director of marketing of cash management services at Mellon Bank, Pittsburgh.

"Of the 200 banks we consider players in cash management, there are probably no more than 20 that provide full or comprehensive services for EDI," Mr. Valenzuela said.

He added that the downsizing going on in corporate America today means companies also are looking at "reducing the number of relationships" they have with banks. He said the implications are both positive and negative.

On the negative side, Mr. Valenzuela said there is widespread concern in the industry that banks will lose customers. But he also said he sees good news for the major cash management players.

"Companies may decide to stay with the bank that has made a major commitment to cash management," Mr. Valenzuela said.

Steven P. White, chief executive officer of Syntonix Corp., a consulting firm based in Atlanta, concurred that there are relatively few banks on the "leading edge" in payments systems.

His concern was over the significant nonbank presence in the payments business and that only now are bankers coming to grips with this.

"A majority of the top 50 banks offer some type of payment service, but banks are all running around scared of the nonbank entry," Mr. White said. "Of all financial services needs, 75% are being met by nonbanks, and [they] are not going away.

"Nonbanks are more focused on the payments system as a fee generating service. They are the ones corporate customers are turning to."

From the corporate perpective, there are many benefits to having payables handled as a cash management service by a bank.

Michael Biel, assistant vice president of cash management sales with First Chicago Corp., gave a presentation recently at the Electronic Commerce and Payments Conference, held by White Papers Inc., Montclair, N.J., on how First Chicago handled its corporate clients' accounts payables.

Mr. Biel said companies benefit by gaining control over internal fraud and by moving the company onto electronic payment methods without having to invest in new equipment, Companies could then devote more time to their core businesses.

"The idea behind it is to provide a single payment system where customers can interact with a single bank using a single service," Mr. Biel said.

Though not all banks are capable of providing these services, the ones that can are. using it to distinguish themselves as providers of superior services among potential and existing client relationships.

"Banks within the same peer group tend to offer the same things," observed Ms. Francis. "Corporate clients are fight-sizing, and depending on who bought who. a bank may lose a customer."

For banks to retain customers. said Ms. Francis, they must continue to develop and offer new value-added services.

She said National City pracuces a strategy called "business partnering," where the bank will meet with corporate clients to discuss ways of improving the total relationship, which has led to the bank being invited to many Fortune 200 companies who have expressed an interest in outsourcing their payables.

"We've found that in the last two years, everyone has been in the mode of looking at their business practices"' Ms. Francis said. "EDI and outsourcing have become major tools and companies are asking themselves, 'Why don't I just focus on why I'm here in the first place?'"

Wachovia Corp, is another bank that offers to handle its clients' bill paying. It services a fairly broad range of industries, -but concentrates on the insurance and health care industries.

The bank has incorporated imaging capabilities into its cash management service, thus allowing the bank to provide clients with "an imaged-based archive of the paid items," said Bob Wilson. vice president of treasury services with the WinstonSalem, N,C.-based bank. "We provide them a PC-based tool which customers can fax or cutand-paste onto documents."

Wachovia has noticed that companies are showing increasing interest in using the service for travel and entertainment reimbursements.

"We can get into the business of direct deposits electronically," Mr. Wilson said. "It opens up for companies who want to move into electronics, but realized that their old legacy system would not be able to handle it."

Mr. White said despite the few banks who were evolving in the new payments business, he found the banking industry behind the curve.

Industrywide, banks didn't offer their corporate customers a consolidated view of the entire relationship. He said most banks have systems that "don't talk to each other."

"The corporate treasurer is getting separate information on securities, wire transfers, and ACH payments, and he's got to consolidate all that," Mr. White said. "The corporation wants to be treated as a customer in their overall financial relationship."

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