As the use of electronic data interchange becomes more widespread, banks and clearing houses are starting to take more precautions to protect their information.

A group of 13 large U.S. banks -- including Bank of America, NationsBank, and Mellon Bank -- will become users of such EDI security systems.

As participants in an EDI payment service provided by the Chicago Clearing House Association, called Edinbank, these banks will be installing data encryption hardware to transmit their safety between their corporate customers, the clearing house, and other financial institutions.

The hardware -- developed by Information Resource Engineering Inc., a network systems security firm -- encodes the payment and remittance data to transmit it between the parties involved in the transaction.

This level of security has become necessary because these transactions are run over more easily accessible computer networks, said Roberta Bowersox, and IRE spokeswoman.

Edibanx transmits the payment and remittance data to bank vendors and suppliers. The EDI chain starts when the payments are sent from a company to its bank, and then forwarded by the bank to the clearing house.

The payment and remittance information is then directed to the bank of receiving company. That bank reconciles the account for the receiving company and sends along the confirmation to the company.

Hardware Limits Access

In addition to encoding the data, the hardware also includes barriers to limit access to the exchanged information.

The 13 banks participating in the Chicago Clearing House's Edibanx program are American National Bank of Chicago, Bank of America, Cole Taylor Bank, Continental Bank, First National Bank of Chicago, First Banks, Harris Trust and Savings Bank, LaSalle National Bank, Mellon Bank, NationsBank, NBD Bank, Northern Trust, and Shawmut Bank.

AT&T Communications, Citibank, J.P. Morgan Co., the United States Treasury Department, and Euroclear Operations Center in Brussels also use IRE's security products.

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