Mellon Financial Corp. was collecting about $30 million in remittances each month for corporate customers, only to see the funds wired away to other financial institutions for investment. Bob Stasik, the bank's EVP, explains that although Pittsburgh-based Mellon Financial offers sweep products - which provide for automatic overnight investment of idle balances and which pay low overnight money market rates - most corporate customers were looking for slightly longer-term investments that offered higher yields. To keep lockbox deposits in the family, the bank needed a way to cross-sell its broker-dealer services to existing clients.
So, the financial institution's in-house technicians, using proprietary Web-based technology that Mellon Financial ($707 billion in assets under management) already relied on to support other corporate banking functions, developed Liquidity Management Service (LMS), a module on iTelecash, Mellon Global Cash Management's (Mellon's treasury management business) Web portal. The site, built on a Java platform, leverages Mellon's proprietary back-end technology and offers browser-based access to a suite of cash management services, including account reporting, ACH, wire transfer, retail/wholesale lockbox and investment modules, according to Stasik.
Development took 18 months and LMS was unveiled in December 2003. Initially, the site offered short-term financial instruments from Mellon Financial Markets (MFM), the bank's full-service broker-dealer that provides investment transactions for LMS users. Other investment products have been added since, including many from non-Mellon sources, Stasik relates. As of spring 2005, LMS offered customers access to about 100 different money market mutual funds - including taxable, tax-exempt and offshore vehicles - and a variety of money market securities.
"We continue to add to the LMS investment choices - that's the reason it's been a huge hit," Stasik says. Seventy-five percent of corporate lockbox customers sign up for the service, a figure that Stasik expects to grow as more customers learn of LMS, and approximately 70 customers invest more than $5 billion through the portal.
By offering non-Mellon as well as Mellon financial products, LMS provides corporate customers with a single source for their short-term investment needs, Stasik says. Mellon does not charge any incremental fees for online functionality or any basis points for its service, he adds. Though corporate clients simply need a Web browser to access the site, Stasik notes, they also have offline telephone access to an NASD-registered MFM representative.
The LMS site provides customers with online confirmation of investment transactions and real-time reporting, according to Stasik. Reports include exportable online histories of transactions and performance results, including positions, yields, income and benchmarks. The online access to consolidated reports improves internal controls, asserts Stasik, who notes that those controls have taken on greater importance in the wake of Sarbanes-Oxley.
Further, the site can be customized. If a corporate client requests a limited number of investment options, only those will be displayed. LMS also enables users to impose access limitations, such as read-only and daily purchase limits, on employees and managers.
Mellon continues to look to expand the product with the inclusion of more international funds and is considering private labeling the system for use by other financial institutions, Stasik relates. Mellon also expects to eventually tie the product to faster check processing via image capture.
"The next trend [for image capture] is to migrate further into the back offices," Stasik says. "What we'll look at here is the whole value chain around the payment of invoices. We continue to look for ways for our clients to outsource their back-office functions."
Institution: Mellon Financial Corp. (Pittsburgh).
Assets: $707 billion under mgmt.
Business Challenge: Retain share of corporate clients' lockbox deposits.
Solution: In-house developed Web-based Liquidity Management Service investment portal.