EVEN AS MANY BANKS retreat from the auto lending business, NationsBank is charging boldly forward.

It's a brave strategy, given that the enemy forces on this battlefield are none other than the giant finance units of General Motors Corp., Ford Motor Co., and Chrysler Corp. In fact, the Big Three automakers are expected to increase their share of U.S. auto loans to 36% this year, while commercial banks' share is expected to fall for the first time to 36%, down from 44% two years ago.

If banks don't innovate, they could soon be elbowed out of this business completely. "It's not a matter of pulling out; banks are being forced out," said Stephanie Schlandt, research director at Payment Systems Inc., the Tampa, Fla., research firm that provided market share figures. "The captive units of car manufacturers have been able to shave rates, improve decision time, and fulfill loans better than the banks.

But NationsBank is fighting back. The company has substantial experience in auto lending and it has a secret weapon. With more than $7 billion in auto loans, NationsBank is cited by analysts as the largest provider of auto loans among banks, though it is still far behind the Big Three automakers.

NationsBank's secret weapon? A new computer system that can approve auto loans in dealer showrooms in 30 minutes. Though the system was just launched in July, profits are already on the rise.

"Auto dealers have two main concerns," said Thomas McKee, senior vice president at NationsBank's auto lending unit, known as the Dealer Financial Services Division. "One, can they get a timely and consistent decision to the consumer? And two, once that deal is consummated, can they get their money quickly? We wanted a system that could address both those issues effectively."

In the past, NationsBank relied on its central mainframe to process and fund loans quickly for car dealers. With a direct connection to the credit bureaus and an automatic scoring capability, the bank had the technical expertise to serve dealers. But because the mainframe wasn't dedicated solely to auto loans, delivering superior service was impossible.

"People tend to buy cars on the weekend and after work," said Mark Bagley, a vice president in Financial Product Support at NationalBank. "The [work file] would clog up, and the system went down for maintenance cycles during peak buying times. To make matters worse, over holidays like Labor Day when car sales are traditionally high, the bank would be closed."

It was clear to senior executives that the Dealer Financial Services Division needed a dedicated system that would enable it to compete effectively with the captive finance companies, all of which had the technology to offer immediate and consistent loan decisions.

The bank started a reorganization plan for its auto lending business three years ago, well before NationsBank was created in the merger of NCNB and C&S/Sovran. The plan called for consolidation of the Dealer Financial Services Division in Greensboro, N.C., and a restructuring of the division along a five-point hub network throughout the South and Southwest. After the merger, the auto division of C&S/Sovran Corp. was integrated into the NCNB system.

Today NationsBank serves 2,500 dealers from five loan production sites, in Greensboro, Columbia, Tampa, Houston, and Dallas. These offices replace 41 dealer representative units.

Instead of relying on the bank's mainframe, the Dealer Financial Services Division installed an automated loan approval and funding system called Creditrevue, developed by Credit Management Systems (CMSI), a software company based in Columbia, Md. Fair Issac of San Rafael, Calif., also provided the credit-scoring methodology that was incorporated into the system. The software is running on midrange computers from Digital Equipment Corp. and Pyramid Technology Corp., Mountain View, Calif.

In all of this, melding the system to the workload was crucial. Mr. McKee pointed out, for example, that the decision to work with CMSI was made only after he and his staff had spent hundreds of hours in the field determining what auto dealers needed from a bank. Then, during the six-month development phase, NationsBank continued to talk with dealers to get their input.

"The dealers saw a lot of the big [bank] players leaving the market, and they were excited that we were asking them what they wanted," said Mr. McKee. "We always went to them with a single purpose: We were in this to make a profit. This was the basis for our discussions."

Today, dealers fax loan applications to the NationsBank hub production sites in their area. Applications are then fed into the Creditrevue system by a clerk and automatically scored and forwarded to the credit bureaus. Once the credit bureau reports come in, the Creditrevue system sends the application into the work file off the appropriate lending officer. This enables officers to set priorities and work with the dealers in a more personal way.

"Some dealers might want to talk on the phone, others might be new accounts that need special attention," said Mark Bagley, a vice president.

Loan turnaround time has also improved dramatically. "The average time it takes to render a decision is 30 minutes," said Mr. McKee.

Processing loans quickly and efficiently is only one part of a successful program. The other critical component is getting the borrowed money to the dealers as soon as possible. With the NationsBank system, once the paperwork is in place, the dealer's account can be credited overnight.

In many small communities, selling cars is still a mom-and-pop business. In order to attract and effectively service auto dealers that are in towns far from a production site, NationsBank set up a 45-person sales network that travels to meet clients face to face.

It may be too early to judge exactly how well the Creditrevue system is performing. Though Mr. McKee declined to provide specific numbers, he did say that the past two months have been more profitable than any such period since NCNB and C&S/Sovran Corp. merged.

NationsBank currently has the auto lending program running in North Carolina, South Carolina, Virginia, Maryland, Tennessee, Washington, D.C., Pennsylvania, Florida, and Texas. Bank officials said they plan to expand the business beyond Texas to other western states next year.

You can bet the boys in Detroit will be watching, and closely, too.

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