Stephen M. Kearney is many things to many people, but to bankers, he is this alone: the man holding the purse strings of one whale of a cash management account.

As treasurer of the U.S. Postal Service, Mr. Kearney, 41, manages the finances of a business with 760,000 employees, 39,000 offices, and $56.4 billion of annual revenues.

Though the Postal Service differs from most U.S. businesses in important ways, it nonetheless exemplifies how many cash management customers are changing their approach to banking relationships.

For instance, like many large businesses, it is reducing the number of banks in which it maintains accounts.

It currently uses about 5,000 banks for cash management. But Mr. Kearney said he plans to reduce the total by 80% during the next few years. A group of about 50 "relationship" banks will get larger portions of Postal Service business.

The service spends an estimated $100 million per year on cash management services.

"We are looking for a bank to treat us as a major, significant customer in every aspect," said Mr. Kearney. "Our job is to continually remind a bank that we are a big customer and a significant customer and we will take the whole relationship into account."

If this threatens some financial institutions, it offers opportunity to others. Those that satisfy the Postal Service's demands will garner a larger share of the pie, while those that don't will lose share.

The pressure Mr. Kearney and other postal executives are putting on cash managers is but one part of an effort to restructure Postal Service finances.

The case is a prime example of how competitive pressures facing corporate customers can change what they demand from financial institutions.

It is well documented that the Postal Service in the 1990s faces unprecedented competition from private-sector carriers like United Parcel Service and Federal Express Corp.

Though it has competitive advantages in its ubiquitous offices and brand recognition, the public mail system had grown inefficient as a result of its age-old dominance.

This inefficiency inevitably led to financial losses. In 1993, for example, the service lost $1.7 billion.

"Our core business of first-class mail is showing signs of erosion and is seriously threatened by a lot of the new communications and payment methods," Mr. Kearney said.

Such developments called for drastic action, so Mr. Kearney and executives like Postmaster General Marvin Runyon and chief financial officer Michael Riley led a charge that achieved a net profit of $1.8 billion in 1995 and $1.56 billion in 1996.

The first step required convincing hundreds of thousands of employees that the Postal Service would have to begin operating with the same urgency that drives private-sector businesses.

Mr. Kearney said the staff in charge of the financials embraced the task and began asking more out of banking relationships.

The Postal Service now considers the overall treatment it gets, he said, and refuses to give out banking business based solely on the lowest bid.

Another change entailed putting the money it gathers each day to better use.

Four years ago, the Postal Service had billions of dollars in cash on hand at the end of each business day but still often borrowed money from the Treasury because the cash was hard to track and put to good use.

The service is gradually finding ways to manage that cash better; the goal is to have a daily cash-on-hand balance of zero by next year. With the improved auditing this requires, the service hopes to avert many interest charges on needlessly borrowed money.

In addition the Postal Service has put more emphasis on relationships with key cash management banks. The short list of these features BankAmerica Corp., Citicorp, the Federal Reserve Bank of Atlanta, First Chicago NBD Corp., Mellon Bank Corp., NationsBank Corp., and PNC Bank Corp. J.P. Morgan & Co. supplies financial advice.

Stephen Herndon, senior vice president at NationsBank, said the Postal Service's changing approach to cash management is manifested in efforts like its "relationship review system," which is designed to make sure the service is getting what it needs.

"We have to go in and stand in front of Riley and Kearney and talk about what we are doing and what we see happening," said Mr. Herndon.

The Postal Service's drive to become more consumer-friendly involves banks in other ways.

It is nearly finished installing 67,000 point of sale terminals from Verifone Inc. at 30,000 postal locations nationwide. The effort, which requires the training of more than 100,000 employees, is aimed at letting consumers use credit and debit cards for purchases at their local post offices.

"It's been a huge undertaking," Mr. Kearney said. "We think it's the largest card acceptance program to ever have been put into place."

With more of its revenue coming from business customers, the Postal Service also is working with banks to develop and test payment system alternatives.

One, called the Centralized Automated Payment System, would let bulk mailers pay fees via electronic debits. Caps, as the system is known, is being managed by BankAmerica.

Another of its emerging wholesale services is a postal payment card, which uses the credit card processing infrastructure. About 60 commercial customers and 20 federal government agencies are testing the system, which is being developed by NationsBank.

The postal payment card and Caps are examples of moving "large business customers and even small and medium-size business customers away from paying us by check to an electronic format," Mr. Kearney said.

Citicorp provides controlled disbursement services for vendor payments. It is working on a payroll service for postal employees in 10 states. It is to be tested in August.

"For us, the relationship with Steve Kearney and the U.S. Postal Service is a strategic partnership that has really evolved over time," said Colin Klipin, managing director of global cash management at Citicorp.

Mr. Kearney said the Postal Service also is testing a stored-value card called Liberty. The program, which uses First Data Corp. as a processor for cards that can hold up to $300, is in a test phase at about 1,000 post offices.

As busy as these projects have kept Mr. Kearney, the District of Columbia native finds time for other interests.

He is chairman of an endowment committee at St. Anselm's Abbey School, the Washington prep school where he graduated. The endowment is meant to fund scholarships and other financial aid packages for students who cannot afford tuition at St. Anselm's.

Mr. Kearney, who has an undergraduate degree from McGill University in Montreal and an MBA from George Washington University, also is active in the Catholic Church, serving as a eucharistic minister in his parish.

His work at the Postal Service was formally recognized when the agency won two awards at a banquet sponsored by the National Association of Corporate Treasurers and Treasury and Risk Management magazine.

"We won gold in cash management," Mr. Kearney said.

To the surprise of much of the banquet crowd, the Postal Service also won the crown jewel of the ceremony: the Alexander Hamilton Award for Overall Excellence.

Anthony Carfang, partner at Treasury Strategies Inc., Chicago, who attended the conference, said that once Mr. Kearney and Mr. Riley had told the story of the Postal Service's turnaround the crowd appreciated why they won.

"At that point, it was kind of like rooting for the underdog," said Mr. Carfang.

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