N.Y. Clearing House to Help Nacha Get Off the Dime on Financial EDI

The New York Clearing House has agreed to help jump-start a stalled effort by the National Automated Clearing House Association to develop a low-cost financial electronic data interchange service.

Software for the service, which is to be aimed at community financial institutions, was originally to have been developed by Maxxus Inc. of San Francisco.

But Dallas-based Sterling Software Inc.'s recent acquisition of Maxxus complicated the development agreement and led to Maxxus' withdrawal from the project.

The New York Clearing House has agreed to work with MCI Communications Corp., Washington, on a DOS-based version of the electronic data interchange service.

MCI, which is lead vendor on Nacha's EDI project, has also lined up an undisclosed partner for a Windows-based version.

Nacha's services are designed to bring financial EDI - in which banks and corporate customers electronically exchange payments and related data - to smaller banks. Such institutions have historically been precluded from offering EDI because of the high cost of the necessary systems.

The new service was originally expected to be in a pilot stage in the second quarter of 1995 and commercially available soon after, but Maxxus' withdrawal caused delays.

Maggie Scarborough, a senior director at Nacha, said a revised release schedule calls for internal testing next month and a pilot in October.

Ms. Scarborough said the New York Clearing House had been developing EDI software before its agreement to participate in the Nacha/MCI project. This software was a "receive only" EDI product designed for small and midsize banks.

The new software essentially met Nacha's specifications, although some minor upgradings were required.

"MCI discovered the New York Clearing House solution in the process," she said. "It seemed like a good fit."

Nacha, based in Herndon, Va., develops rules for, and promotes use of, the automated clearing house network.

Officials at Nacha hope that building a low-cost remittance-handling service for small and midsize banks will spur the growth of EDI in general. With relatively few banks of any size engaging in EDI, experts said the market remains wide open.

More than 90% of the nation's commercial banks are unable to effectively transmit to corporate customers the remittance information that accompanies clearing house transactions, Nacha officials said.

In a written statement, William Hymes, president of Sterling's banking systems division, praised Nacha's effort to encourage EDI. He also said, "Sterling continues to support the Nacha Rapid EDI project and wishes to see it succeed."

Nacha has been considering rules changes requiring financial EDI capabilities for all clearing house network users, but officials at the association sense it must wait for affordable EDI products to reach the market.

Several low-cost solutions have become commercially available in the last year or so. These include Translink, developed by Card Establishment Services, and Sterling's Maxxus product.

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