Is NationsBank Corp. out to make the same waves in the card business that it does in so many other aspects of banking?

If the answer begins at the top, in personnel moves, it is a resounding yes.

The company's card services unit, which is based in Charlotte, N.C., and includes a credit card bank in Delaware, is headed by Eileen M. Friars. One of the highest-ranking women in the bank card industry, Ms. Friars became well known as a strategist during a 14-year consulting career with the MAC Group. In 1990, she joined C & S / Sovran Corp., which was acquired in the megamerger that created NationsBank. She has been card services president since October 1991.

Three months ago, she added a marketing director to her team: Robert E. Stock, who previously had developed customer-retention and new-account programs for Barnett Banks Inc. in Jacksonville, Fla.

As of March 31, with $5.1 billion of card loans outstanding, NationsBank ranked 13th among bank card issuers. Growth is on its agenda. But it would have had to almost double outstanding to rank fifth in credit cards, which is its rank among bank holding companies in total assets.

In this interview, Ms. Friars and Mr. Stock indicate that the Start credit card, which NationsBank initiated earlier this year with Start Inc. of Herndon, Va., may be only an indication of the marketing innovations that lie ahead. Start cardholders can "save as they spend," using rebates to build annuities for retirement. Q.: How does one innovative in this environment? Is it, for example, through cobranding or pricing? FRIARS: I think those are certainly vehicles that one can use to innovate, but one needs to start with the consumer and develop creative ideas based on specific needs and interests.

A good example of that Strategy is the NationsBank Start program. A lot of people look at their financial situation and realize that they need to prepare for their retirement, but at the same time they recognize that it is difficult to save money. By the end of the month, somehow they have spent it all, so putting that little extra bit of cash away seems impossible.

The Start program is designed to help customers develop a long-term savings plan, which they can use toward their retirement. But they don't have to do anything differently.

Start customers can simply use their credit cards to purchase items that they would normally buy. And of course, there are the additional benefits in savings you get from shopping at specific retailers. STOCK: We innovate certainly through product, but also by being much better in identifying and anticipating the needs of our customers. Q.: How do you anticipate those needs? STOCK: We do ongoing consumer research. Essentially, we closely monitor the behavior of our customers by modeling their past behavior with other customers' patterns. We try to predict what their needs will be based on what they have been. We are becoming increasingly more sophisticated in this area. Q.: What innovative strategies set NationsBank apart from other issuers? FRIARS: In addition to programs that target customer needs, we have also involved our individual branches in the sale of credit cards. We have programs that provide incentives to our branches to sell cards. The NationsBank culture encourages creativity. Q.: What kind of incentives? FRIARS: I can't really elaborate. Q.: Could you say they are financial incentives? FRIARS: Yes. STOCK: We try to anticipate our customers' needs through our retail distribution channels in order to source our credit cards. We use our retail relationships as a basis for credit card sales. I would say that we see our current base as an increasingly important distribution channel. Q.: Does that mean you are marketing to your own customers? STOCK: Yes, but of course that isn't the only marketing we do. Q.: What new trends in the card business are you interested in? FRIARS: Consumers are clearly interested in value-added products, which we see as as a significant trend. We also see heightened competition in the marketplace, and the continued consolidation of the industry. STOCK: Consolidation among issuers plays off the competitive nature of the business, and obviously we are very concerned and interested in opportunities that a large issuer such as NationsBank has in the marketplace. Q.: What types of value-added programs are you referring to? FRIARS: A good example is our U.S. Air card, which was mentioned in a Money magazine article listing the 50 best values in the United States. Q.: How is the industry handling the fraud problem? FRIARS: A lot of energy has been focused on fraud, and the associations have been trying to minimize this growing problem.

At NationsBank, we put a card activation program in place, which has been very effective. Basically, the cardholder is required to call an 800 number to confirm that the card reached its intended destination. The customer has to provide personal information that would prove his or her identity. This protects customers against someone stealing their card out of the mail.

Other issuers also do this, but we were one of the first. Q.: Where do you think interest rates are going, and how would a change affect the industry? FRIARS: Predicting what interest rates will do is very dicey. We do not expect any dramatic changes to occur in the near term. But obviously, a lot of factors related to the economy and consumer confidence will impact where rates are headed in the longer term.

Right now the rate environment is very good for the industry, particularly the low cost of funds. That has allowed us to pass some of the benefits on to the customer.

At the same time, a lot of issuers have moved to variable rates, which permitted the industry to offer lower-rate products.

That also provides some protection if, in fact, rates rise. Consumers have really benefited in the short term from the reduction in rates. STOCK: I feel that the most important development is the proliferation of variable-rate cards in the industry and at NationsBank. If the prime rate and cost of funds go up, hopefully the effect variable-rate pricing will have is to facilitate a much quicker reaction to fluctuations in the market. Q.: Are value-added products here to stay regardless of the rate environment? FRIARS: I think value-added cards are going to be a continuing trend. I see a lot of issuers working to become more efficient, and finding ways to lower costs. Obviously, if rates rise significantly, there will be some increase, particularly in the variable-rate cost. But at the same time, consumers should be earning more on their money market funds and certificates of deposit. STOCK: Actually I think variable rate cards allow issuers to be consistent in adding value to cards. Some of the funding risk and the margin risk inherent in fixed-rate cards has been removed, allowing issuers to continue delivering value-added cards. Q.: Recently NationsBank introduced a promotional low-rate credit card that comes with a free companion ticket on Delta Airlines. Why did you choose an airline to add value to your product? FRIARS: Airline programs are popular because they present a lot of benefit. So that is part of the reason for an airline promotion, but obviously not everyone is interested in such a deal.

It is a segmentation strategy. We are trying to reach those people who would find our card attractive. Clearly, there is a large population of consumers who travel frequently, and having an extra ticket to go visit family or whatever is perceived as a real plus.

We are very enthusiastic about this offer. But it is one of many things we have done. For example, we are offering a sweepstakes for our current customers, which gives them the opportunity to win free gifts by simply using their cards. STOCK: The Delta offer is a way for us to reach new customers by differentiating our product in the market. Q.: Last year we reported that NationsBank intended to triple credit card outstandings, to $12 billion, over the next three years, largely through acquisitions. Is that still the goal or has the strategy changed? FRIARS: Yes, our goal is to grow the credit card business. That is still very much our intent. Q.: Are you still targeting $12 billion? FRIARS: I have heard that number used. That specific number is not a target, but it is generally expressive of a strong desire to grow this business and to be a sizable issuer. We will look at internal growth opportunities as well as opportunities to buy portfolios. Q.: Mr. Stock, how did your former jobs at First Chicago and Barnett prepare you for your position at NationsBank? STOCK: First Chicago is Obviously a very large player in the credit card business, and a very accomplished one. They have been able to achieve a lot of growth, and I was fortunate for several years to be a part of that.

One thing I gained at Barnett was experience in dealing with the retail branch network. First Chicago was much more a remote distribution environment while Barnett, like NationsBank, has an extensive retail branch network.

I managed First Chicago's Mileage Plus [United Airlines] affinity program, and at a different time I was in charge of cardholder retention.

I was also responsible for a program called Marriott Honored Guest Awards Club, a continuity program. And initially I headed up the student marketing program.


Eileen M. Friars Age: 43 Position: President, NationsBank Card Services Since: October 1991 Previous posts: Senior executive vice president, C&S/Sovran Corp. Co-director, financial services practice, MAC Group (now Gemini Consulting) Degrees: Economics and government, Simmons College MBA, Harvard Business School

Robert E. Stock Age: 39 Position: Director of marketing, NationsBank Card Services Since: July 1993 Previous posts: Senior vice president, Barnett Card Services Corp. Senior marketing director, cardholder management, First Chicago Corp. Degrees: Creative writing, Columbia College (Chicago)

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