IN THE QUEST FOR FEE income, small banks are treading on the toes of their bigger brethren by stepping into the business of cash management.
For example, Synovus Financial Corp., Columbus, Ga., recently installed cash management software as it data processing subsidiary, Synovus Data Corp.
Each of the company's 32 banks throughout Georgia, Florida, and Alabama now has the ability to tap into the system. The affiliates, ranging in asset size from $37 million to $1.3 billion, thus can offer cash management less expensively than if they had to install hardware and software themselves.
Ten affiliates have already subscribed to the service, and the remainder are expected to be on baord within a year.
"We needed a system that would allow each of the affiliates the flexibility to operate in their local markets and handle fee income generation without having them make a software or hardware investment on their own," said Peggie Chappelle, vice president for cash management at Synovus Data.
Synovus runs its affiliate banks using a super community bank strategy, in which affiliates keep their original names and much decision-making authority, while data processing functions are centralized.
"Affiliates purchase the [cash management| service from us at a competitive price and then determine what they will charge their customers for the service," said Ms. Chappelle.
The system installed by Synovus Data is called Maxx-Banker, developed by San Francisco-based Maxxus Inc. It allows the Synovus affiliates to offer a full range of cash management services -- including balance and transaction reporting, automated clearing house originations, and personal computer transfers.
Debbie Williams, a consultant at the Tower Group in Wellesley, Mass., said that from a business perspective there are many ways cash management systems are helping corporate customers -- including automated clearing house payments, lockbox applications, and fund reconciliation.
"Cash management is a free generator that has become very competitive for most banks," she said. "A corporate customer no longer needs a number of banks to handle its system, because the system can be put on a customer desk through a workstation."
The 10 Synovus affiliates that have purchased the cash management services are primarily in small towns and have to compete with larger institutions like Wachovia Corp. and NationsBank Corp. -- both of which, Ms. Cheppelle noted are "substantial" cash management providers.
"In the past the affiliates were not able to compete with these larger institutions because of the amount of money it cost to invest the technology," she said. "With Synovus offering the service, they can get the technology for very low cost and compete whenever they need it with essentially no front-end investment."
Synovus decided to go with the Maxxus system based on the relationship built up between the bank and the vendor.
"I know that it offered both excellent programming and support, and was a good product at the right price," said Ms. Chappelle.
Although Ms. Chappelle would not comment on the cost of the system, she said that it has paid for itself in the first seven months.
"In the first seven months we are at a level cash flow position with the product line, which means I am bringing in as much in revenue as it costs to run it," she said.
The company installed the system in its Columbus data center with the idea of marketing cash management services to its affiliates, but once the banks became aware of the service, ot sold itself.
"We did not have an opportunity to market the system," ms. Chappelle said. "The banks started to call me, saying: 'I have a customer who needs it, how quick can you give it to me?"
The system is linked from the data center to the affiliate banks through a local area network attached to personal computers.
"The system is designed to work with commonplace office equipment: a Pc, a modem, and some other phone lines," said Ms. Chappelle. "We can get a participating bank on-line in one-day -- which includes training -- and they can be linked and working immediately."
Synovus works directly with the affiliate's customers, providing training on how to use the system. If a customer has a problem with the system, the bank employees can provide the answers. The product is delivered directly from the data centre to the corporate customer's operation.
The software has two components: one on the customer's personal computer and the other at the data centre.
"Regardless of the customer's or banker's computer experience, the system is very easy for them to operate," said Ms. Chappelle.
The software is tailored to the corporate customer's needs. When a company logs onto the system, its name and account information appear on the screen.
As it delivers the system to the rest of its affiliate banks, Synovus will continue to develop cash management opportunities.
"I am developing some new system capabilities that have nothing to do with the Maxxus system -- including a sweep account that will allow a customer to sweep money into an overnight investment from disbursement accounts," said Ms. Chappelle. "Currently, Maxxus does not offer the technology to provide this service, so we are working on adding this function to our system."
Ms. Chappelle said that at the current rate Synovus will end 1994 with a positive cash flow for month-to-month expenses and will have made "some" money on the product.
"My objective is to develop whatever it takes, productwise, to allow the Synovus affiliates to stay competitive with any bank in their marketplace," said Ms. Chappelle. "Throughout the next year to 18 months we will be in a developing mode; what we have in place now is just the foundation."
