As the treasury management business continues to consolidate, NationBank Corp. is fighting a two-front battle: maintaining paper-based products traditional paper-based products while it balances on the edge of electronic delivery systems.

The goal is to keep the Charlotte, N.C.-based giant among the top five banks providing cash management services to companies. That' the creme de la creme of a group of 20 banks that already control nearly half the $7 billion-a-year business.

"We envision that those top 15 or 20 banks will increse their percentage of the total pie over the next several years," said Connie Beck, executive vice president and head of NationsBank's Depository Services Group in Dallas. "Therefore, building and maintaining market share on a very targeted and focused basis is very important."

Products Offered

Treasury management, also known as cash management, involves structuring and managing the flows of cash and information for corporate customers. The major products include automated clearing house, controlled disbursement, wholesale lockbox, demand deposit accounts and information and balance reporting.

The 1993 edition of Ernst & Young's annual cash management services survey, which covers the top 300 banks, shows the top 20 banks gathering more of this business for themselves, providing 37% of the business in 1991 and about 48% today.

Much of this has to do with the recent wave of bank acquisitions, which continually reduces the number of cash management players.

Rising No. 1

NationsBank, with $156 billion in assets, is illustrative of the trend. In 1988, it acquired Dallas-based First Republic Corp. and in 1992, C&S/Sovran Corp. of Atlanta. Both banks had a strong wholesale lockbox business, which involves the centralized collection of receivables and check clearing.

Building on the strengths of these acquisitions, combined with services provided by predecessor organization NCNB Corp., NationsBank is now the No. 1 U.S. bank in both wholesale lockbox and automated clearing house credits origination, which is the direct deposit of payroll, according to an Ernst & Young survey.

Data from North Carolina-based consulting firm Phoenix-Hecht indicate that NationsBank enjoyed the largest percentage - 28% - of corporate relationships nationwide of any bank with revenues of $100 million and up in 1992. (Data for this year are not yet available.)

Electronic Products

"We're positioning NationsBank as the dominant, most important treasury management bank for custormers we want to do business with," Ms. Beck said. "We're extremely focused on whom we want to bank."

The trick for NationsBank is to maintain this customer base while at the same time diverting considerable resources into electronic delivery products. Much cash management activity still involves the transfer of paper via the mail or fax machine.

"We're not moving toward a totally electronic world anytime soon. But we are moving into a hybrid world with combinations of paper and electronic transactions," said Jack Meckler, senior vice president with Littlewood, Shain & Co., a consulting firmin Raleigh, N.C.

Accounts Payable

NationsBank, for example, recently introduced a comprehensive payables product, which allows customers who maintain both paperand electronic payables systems to outsource their entire accounts payable function to NationsBank.

The customer can transmit a single payables file to NationsBank, which in turn processes each payment as specified, using ACH, wire transfer, or paper check.

Other recent NationsBank product introductions include:

* Windows-based information reporting software that provides customers with a more automated method of accessing information on their accounts. They can also initiate transactions, such as sending a wire transfer through their personal computer.

* Electronic payment authorization for automated clearing house transactions. Using this product, companies will be able to decide which ACH transactions to accept, both debit and credit, when presented against their NationsBank accounts.

The product provides three levels of security on all transactions.

The Competition

NationsBank executives admit that other banks have introduced similar products. Leading cash management banks include First Chicago Corp.; Chase Manhattan Corp., New York; Citicorp, also of New York; Pittsburgh-based Mellon Bank Corp., and Wachovia Corp., Winston-Salem, N.C.

But none of these other banks can match NationsBank's geographical diversity, a nine-state franchise stretching from Maryland to Texas.

"We think we're really in a unique position vis-a-vis other banks because we have geographic diversity and also the size and track record to make the strategic investments for the large corporate arena outside our home markets," said Edward F. Sykes Jr., senior vice president of NationsBank's treasury management division in Charlotte.

New Direction

"If you look at the lockbox network that they can now provide - which includes Baltimore, Richmond, Charlotte, Atlanta, and Dallas - that's a pretty competitive advantage," said Mr. Meckler, the consultant.

In the wake of the C&S/Sovran acquisition, NationsBank has tried to build on its geographic diversity by moving swiftly toward electronic delivery.

"We were all good at pushing a lot of paper, and we were all gearing up for electronics," Mr. Sykes said, referring to the predecessor banks. "But we have flat out leaped ahead from where any one individually was."

Orchestrating the Transition

The planning for this push began in the fall of 1991, before the C&S/Sovran deal was even closed. Transition teams from both banks decided which systems to continue using, which ones to discard, how many lockbox sites to retain, and what kinds of customers to pursue.

Mr. Sykes said NationsBank hasn't yet completed all the projects that were designed during this planning stage, but suggested thecompany was "very well along" in that process.

NationsBank's aggressive development of electronic delivery systems has won plaudits from industry observers. "You've been seeing a lot of banks doing fits and starts in this," said Larry Marks, with the consulting firm Sagner Marks in Chicago.

"NationsBank is really kind of different, in that they've never done that. They decided to set a course and, regardless of what they've been doing in other sectors of their marketplace or strategic plan, they've always kept moving forward on this issue."

A Game of Float

NationsBank executives would argue that they have no choice. During the late 1970s and throughout the 1980s, rising interest rates made corporate treasury management largely a game of getting the maximum advantage out of a company's float.

Today, with interest rates at historical lows, the focus is on efficiency and timely retrieval of information, which is where electronic delivery comes in.

"What we find, traveling around and calling on customers, is that the treasury function in the companies is under pressure for things like efficiency gains," Mr. Sykes said. "You're not going to get the big bang from float anymore."

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