PNC Bank Corp., building on its leadership position in wholesale lockbox banking, is exploiting a void in the electronic bill payment and presentment market with its planned joint venture with Perot Systems Corp.

BillingZone, announced Wednesday, would enable corporations to present and pay bills over the Internet. As one of only five banking companies that operate a national wholesale lockbox network, PNC is in a prime position to simplify the complexities of collections and account reconciliations on-line.

"We feel we have crafted something here that takes advantage of real gaps in the marketplace," said Francine Miltenberger, senior vice president and division manager of PNC's treasury management group. Most providers of electronic bill payment and presentment are focused on the business-to-consumer market, she said.

PNC's move is risky because it threatens to cannibalize its existing paper-based service. Wholesale lockbox represents about 8.5% of banks' cash management proceeds, or $875 million of 1998 revenues, according to Ernst & Young.

Ms. Miltenberger acknowledged that checks are likely to remain an important payment method for corporations, which recognize the value of float. "But over time, electronic bill payment and presentment will start to make a serious dent into" check payments, she said. Billers will probably facilitate that change by providing incentives to encourage electronic payments, she said.

Observers commended PNC for taking a stand on the issue of corporate electronic payments and encouraged others - especially the other four operators of national lockbox networks, Bank of America Corp., Bank One Corp., First Union Corp., and Mellon Financial - to do the same.

Susan Skerritt, a partner at Treasury Strategies, a Chicago-based consultant to corporations and banks, predicted there will be "a fundamental change in the way that payments will be processed in the U.S. If any financial institution does not recognize that, there will be an impact on their paper-based business."

BillingZone is a clear and largely unique example of a banking institution converting a longstanding business to the Internet, said Anthony Carfang, another partner at Treasury Strategies.

The service will be available June 1 to PNC's corporate customers and to customers of other banks. PNC and Dallas-based Perot have made undisclosed investments in the start-up and will share ownership equally.

The Pittsburgh-based banking company has been pursuing wholesale electronic presentment and payment services with a number of its corporate clients, including Xerox Corp., for several years. It has conducted pilot tests of the service with CheckFree and with Transpoint, which is being acquired by CheckFree.

"It became obvious to us that billers need a more extensive implementation and support service than they can typically find out there," Ms. Miltenberger said. That recognition is what led the bank to consider forming its own venture.

PNC would take electronic files from corporations in an electronic data interchange format or other computer file formats, and convert them for use on the Internet site. Payments would be negotiated and settled electronically though the automated clearinghouse.

"There will be interactive customer service links so that when payers get on-line with questions about a bill, they can interact with billers via the site," Ms. Miltenberger said.

Perot, a global systems integration and technology consulting company, would match the systems of paying and collection institutions. Perot's TimeO division has been working with PNC since September to develop the technology platform for BillingZone. PNC will motivate several of its customers to participate on the BillingZone service. More details regarding the launch and participants will be revealed in April.


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