You Can't Do It All: Partners Help Provide Wider Menu of Services

KeyCorp customers seeking government contracts can now get E-mail or a beeper message thanks to the bank when something turns up.

To offer such services the Cleveland-based KeyCorp formed a partnership this summer with U.S. West, the Denver-based regional telephone company.

"We could have built it ourselves," said Steven Sinisgalli, a KeyCorp senior vice president. "The question is how well and how quickly we could have done it."

KeyCorp and dozens of other banks are forming partnerships to provide services small-business customers demand - payroll processing, leasing, insurance, retirement plans, even contract procurement.

For example, National City Bank of Columbus, Ohio, agreed last week to promote payroll processing and insurance and retirement plans from Team America to small-business customers.

"Alliances are growing because bank managers are realizing they can't be experts in all areas," said Charles Wendel, president of Financial Institutions Consulting in New York.

Bankers looking to add services are struggling with whether to team up with other companies, buy them, or develop their own skills.

Bankers said they tend to form partnerships to enter a new field quickly or move into a technology-intensive business that requires special expertise.

For example PNC Bank Corp., Hibernia Corp., and Barnett Banks use Paychex Inc. of Rochester, N.Y., to process employee paychecks for small- business customers.

"Small business is a plum market, and banks want to carry as many products as they can to interest the customers," said Walter L. Turek, vice president of Paychex.

Mr. Turek said his company wants to work with other banks.

BankBoston Corp., Chase Manhattan Corp., and First Chicago NBD Corp. are among 30 banking companies that began working with Intuit last year to offer PC banking for small business.

And Cullen/Frost Bankers Inc., San Antonio, formed a partnership with a local finance company four years ago to provide accounts receivable financing for small businesses. It bought the company two years later.

"Partnerships are a good way to test the waters," said Tom Frost 3d, senior vice president for the $5 billion-asset bank. "It's a good way to understand the business and limit your risk."

Cullen/Frost also uses outside companies to provide PC banking and mutual funds for its small-business sweep accounts and retirement plans.

"We are trying to be a relationship bank like a small bank and keep up with the products at the larger banks," Mr. Frost said. "The only way to do that is with outside help."

William Freeman, president of Pennsylvania State Bank in Camp Hill, went through a similar process when he decided to offer small-ticket leasing services.

The $87 million-asset bank uses an outside company to provide accounts receivable financing and considered working with another company for leasing services.

"Leasing is not as complicated," Mr. Freeman said. "With accounts receivable financing, we didn't have enough expertise or manpower to do it ourselves. A small bank can't do everything."

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