Jousting with AMEX Pays
Bloom, Jennifer Kingson, American Banker
In 1990, a grim time at First Bank System Inc. in Minneapolis, Philip G. Heasley approached his new boss with what sounded like a crazy proposition: to stake a claim in the corporate charge card market.
Despite encouragement from the MasterCard and Visa associations, few banks had given that business a thought, essentially conceding it to American Express Co.
Although First Bank was "11 heartbeats away from questionable solvency," as Mr. Heasley described it, he was able to convince the new chairman and chief executive officer, John F. Grundhofer, to "invest a fair amount of money in this effort."
The corporate card program started with a single client, Burlington Northern railroad, which has since merged with Santa Fe Pacific. The program was reviewed every five weeks. To Mr. Heasley's delight, "Jack stuck with it and it has actually returned multiples of the most optimistic projections we had for it."
First Bank, which acquired U.S. Bancorp of Portland, Ore., this summer and adopted its name, today enjoys what one analyst calls "a duopoly" with American Express in commercial cards. U.S. Bank is the largest issuer of Visa corporate and purchasing cards, and its clients include 144 of the Fortune 500.
The recent merger was a boon to Mr. Heasley's brainchild. As the deal was being consummated, he said, First Bank's card group signed up seven corporate clients of the "old" U.S. Bancorp.
The rest of the industry has finally come around to viewing corporate travel and entertainment cards, and their purchasing and small-business cousins, as hot opportunities. But the Minneapolis superregional does not view other banks as competitive threats.
"I think it would be fair to say we're larger than everybody else combined," said Mr. Heasley, who is vice chairman and president of U.S. Bancorp's retail product group.
Among U.S. Bancorp's bigger accounts are Northwest Airlines and Lockheed Martin. Others "run all the way from supermarkets up to Amway Corp.," Mr. Heasley said.
In the second quarter this year, First Bank System reported credit card fee revenue increased $12.9 million, or 17.6%, from a year earlier. It attributed the leap to higher volumes for both corporate credit cards and the cobranded Northwest Airlines WorldPerks card.
In early 1994, First Bank landed an exclusive contract to provide purchasing cards for the U.S. General Services Administration. "Taking on purchasing for the U.S. government absolutely cemented us in that business," Mr. Heasley said.
The federal contract is up for grabs at the end of this year, and the bidding is likely to be intense. U.S. Bancorp hopes it has gained an insider's advantage.
"We'll have spent over $100 million in bringing our systems and capability to the (government's) next procurement level," Mr. Heasley said.
Mr. Heasley, 48, began his career at Citicorp in 1974, after graduating from Marist College and Bernard Baruch Graduate School of Business in New York. When Citicorp, originally a MasterCard bank, wanted to take advantage of the new duality rules and issue Visa, "I ended up getting involved in signing them up with Visa," the banker said. …