A realization that $200 billion of revenue is up for grabs- with nonbanks in the hunt-gave participants in the National Automated Clearing House Association's Payments '99 conference last week reasons to cheer and to worry.

Payment services generated $200 billion of business in 1997, according to PSI Global, a Tampa-based consulting firm. Banks captured 57% of that volume. Hardware and software vendors, third-party service providers, transportation companies, and nonbank financial service companies got the rest.

"The business of payments is huge," said Janet Smith, executive vice president at Wachovia Corp. Payments represent "the third and last major bank franchise," after lending and asset management.

Its' importance warrants in-creased attention from management, Ms. Smith said. That recognition led to her appointment as Wachovia's "payments czar," formally the manager of payments systems strategies.

The job primarily involves developing common goals for the bank's payments businesses and coordinating them.

Payments produce about 35% of Wachovia's net income, Ms. Smith said. She is paying a lot of attention to electronic bill payment and presentment, electronic check presentment, chip cards, and security technologies such as digital certificates.

Her counterpart at First Union Corp., Louanne Alexander, vice president of payments strategy, said her job is to explain digital certificates and why banks should care about them. The job includes delivering concise explanations to chairman Edward E. Crutchfield.

Though payments generated 42% of First Union's net income, "we had absolutely no enterprise view of the payments business," Ms. Alexander said. "We were very much managing things in silos."

Sharing Ms. Smith's concerns about commercial payments on the Net and on-line bill payments and presentment, Ms. Alexander is also intrigued by the "aggregator" opportunity, in which customers would express their "financial wishes on a Web site" and banks would bid for their business.

"We really think that is the direction it is going," Ms. Alexander said. "I think that is what our consumers want."

Keynote speaker Scott McNealy, chairman and chief executive officer of Sun Microsystems Inc., recommended looking at the way the venture capital market operates.

"My big message today is, watch where the dollars are going," Mr. McNealy said. "Think about the market cap of America Online, eBay, E-Trade, and Amazon.com," Mr. McNealy said. Those four have a combined valuation exceeding $200 billion.

"Compare it to the market cap of all of the organizations here in this room."

The contrast is stark. The top 100 banking companies' market capitalization passed $1 trillion at the end of the first quarter. It took only four Internet companies to exceed one-fifth the capitalization of 100 banks.

"Pretty interesting, huh?" Mr. McNealy said. "I think that is really where we have all got to pay attention."

Elliott C. McEntee, Nacha's chief executive officer, asked the 1,100 attendees to put their worries aside for a moment and revel in his association's 25th "banner year."

The automated clearing house system processed 5.3 billion transactions valued at $16.3 trillion in 1998. Participating were 20,000 financial institutions, two million businesses, and 100 million consumers.

Initially developed to automate payroll deposits and other recurring payments, the ACH has since evolved into a network that handles corporate trade payments, home banking transactions, and interbank settlements associated with checks, credit cards, and automated teller machines

"You can say that direct deposit is the grandfather of electronic banking," Mr. McEntee said.

Scott Peterson, senior vice president of Norwest Corp., said bankers have been at the forefront of electronic commerce for 20 years.

But for better or worse, Internet technology is radically changing the nature of information reporting, historically a staple among cash management services, he said.

As information becomes more accessible, "the value of information, in terms of what customers are willing to pay for it, is coming down dramatically," Mr. Peterson said. "Smaller businesses and consumers have more sophistication on their desktops than larger corporations.

"They are getting information for zero cost, so I expect in the next couple of years we will see a tremendous downward pressure on this cash cow that we have been milking in the last 20 years."

Mr. Peterson recommended that bankers evaluate their products and "intelligently cannibalize them."

Reflecting its new national ambitions, the New York Automated Clearing House, the ACH clearing and settlement arm of the New York Clearing House Association, has changed its name to the Electronic Payments Network.

One of three private ACH operators, the Electronic Payments Network has 885 institutional members. It was formed in 1975 to clear and settle ACH transactions in the second Federal Reserve District.

In early 1998, the Federal Reserve paved the way for private-sector systems to pursue customers outside their operational areas.

The old name "has served us well for over 20 years," said George Thomas, senior vice president of NYCH, "but our focus has changed from being a regional organization to a national one."

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