In what may be among the earliest tests of Internet-based financial transactions, BankAmerica Corp. and the Energy Department's Lawrence Livermore National Laboratory have been making financial electronic data interchange payments over the huge network for about a month.

The companies said the payments, to five vendors, have totaled $40,000 to $60,000 daily. The vendors' names were not disclosed.

Lawrence Livermore, a Livermore, Calif.-based cash management customer of BankAmerica, pays about $300 million a year to over 3,000 vendors.

Marty Stein, vice chairman and head of BankAmerica Systems Engineering, said the pilot project, which is to last six months, "marks the first totally automated and electronic EDI application employing digital signatures and public-key encryption to occur on the Internet."

"There's real money flowing - it has been for a month," said John Rhodes, project leader with Lawrence Livermore. Now, he said, "we are only issuing payments to those vendors whose banks provide EDI capabilities."

Electronic data interchange is the computer-to-computer exchange of business data in standard formats, such as purchase-order documents, invoices, financial documents, and payment-processing documents. Financial EDI occurs when payments are sent with the data.

Bill Jetter, a vice president and project consultant with BankAmerica, said the pilot's goal is "to see if we can transfer payment data between a company and a bank securely." Rather than use private networks such as value added networks, he said, "we are exploring to see if there is a better way, a cheaper way."

Mr. Rhodes said the Internet, with its global reach, may be the answer.

In the BankAmerica model, sensitive information is wrapped in the Internet's electronic mail envelope using private-key technology - the Data Encryption Standard - and public-private-key technology from RSA Data Security Inc.

At the bank, the transmission meets a "firewall" between the Internet and the bank's internal network. A server computer verifies the transaction, then routes it to BankAmerica's EDI system.

Lawrence Livermore receives electronic acknowledgement in about six minutes, while the bank sends the information, along with payment, through the automated clearing house.

"Its truly a seamless approach between the company and the bank," Mr. Jetter said. "With the growth of access to the Internet, more businesses are examining the possibility of using the network for paperless commerce."

Success for BankAmerica's model or something like it could spur other banks to develop similar Internet capabilities, and could also stimulate the slow growth of financial EDI.

Clearly, banks and their corporate customers are interested. A single payment with accompanying remittance information can make reconciliation of multiple invoices unnecessary.

Such streamlining could be the basis of a lucrative cash management business, so most top cash management banks have invested in sophisticated EDI systems.

But so far the payback has been slow. Because up-front costs are high, most banks are not ready to pass remittance data to small and middle-market companies.

The problem is that the banking industry has not figured out "how to do EDI as efficiently as sending a fax," Mr. Jetter said. "We are hoping that in the long run, (the Internet) makes the whole implementation cycle of EDI much more seamless and much easier to do"

Adam Backenroth, a vice president with Chemical Banking Corp., said that although many banks have made major investments in building EDI systems, the use of the Internet might facilitate widespread growth.

"It makes sense," he said, because E-mail is used much more widely than the private networks.

Mr. Backenroth is also an executive with the Financial Services Technology Consortium, a coalition of banks and technology companies working on future systems for electronic payment.

Two members of the consortium, Chemical and Bank of Boston Corp., are soon to test a similar Internet payment system, but for consumers.

The BankAmerica pilot is to be evaluated by the Fisher Center for Information Technology and Management, a research group with the University of California at Berkeley. The group plans to assess the feasibility of using the Internet for transmitting financial EDI transactions; the results are to be published early next year.

BankAmerica and Lawrence Livermore spent the last six months developing the systems necessary for their test.

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