Bank One Corp., giving legs to a corporate service that has yet to be widely adopted, is marketing cross-border automated clearing house payments.
Officials at the Chicago banking company say the increasingly global economy and the Internet are providing a big boost to ACH-like bulk payments, which are less expensive than the alternatives offered by large money center banks: Fed wire funds transfers or payments made through international correspondent banks.
"There is a need for companies doing business outside of the U.S. to make payroll and vendor payments in a more cost-effective way," said Celia Rodee, a first vice president at $270 billion-asset Bank One, which has operations in 11 countries. Some U.S. companies have to pay their international employees in checks, "which take a long time to clear, or in wires, which are very expensive," Ms. Rodee said.
Bank One is marketing Global Payment Gateway to middle-market companies, which can make low-value payments into eight European countries, Canada, and the United States from a central multicurrency Bank One account.
Bank One is executing the payments through partnerships and its membership in Inter-Bank On-Line System, a group of banks that banded in the early 1990s to link bank accounts at more than 5,500 branches in eight European countries. The IBOS consortium includes Royal Bank of Scotland and Banco Santander of Spain. For access to the Asian markets, Bank One has an alliance with Standard Charter Bank
The Bank One service is ideal for companies originating 800 transactions a month but can be used by those making as few as 200 if they are done in one batch, Ms. Rodee said.
Boston Consulting Group says bank revenue is expected to drop to 79 cents per domestic payment by 2007, versus $1.11 in 1997 and $1.17 in 1994. Revenue from cross-border payments is expected to fall even more: to $3.38 in 2007, from $13.52 in 1997 and $20.55 in 1994.
But Ms. Rodee says several developments favor cross-border ACH. The 1994 North American Free Trade Agreement has created a need among U.S. businesses operating in Canada and Mexico for an ACH capability, she said. In Europe, the euro is simplifying payments for corporate trading partners by letting them pay for goods in one currency, but there is no Pan-European ACH system, Ms. Rodee noted.
Priscilla Taylor, director of network products at Nacha, the electronic payments association in Herndon, Va., said, "The times are changing, the banking systems are changing, and correspondent banking relationships on an international basis are also changing."
Bank One is not alone. The Federal Reserve is developing an ACH service to send automated clearing house payments into Canada, and Wells Fargo & Co. has been sending ACH-formatted payments into Canada for several years. Nacha has developed standards for cross-border gateway operators into Canada and Mexico, where banks can become hubs, or gateways, for banks and corporations seeking to do business in a specific country.
Still, industrywide development of a more comprehensive ACH system has been slow. Regional banks are interested, but large banks see such a system as a threat to their international payments businesses.
The Worldwide Automated Transaction Clearing House, which aims to develop ACH procedures, is still in its formative stages. The group has 48 banking members in 14 countries, and in the first of a two-phase effort is readying its business-requirement specifications for publication in July.
Watch would receive payment instructions from member institutions and transmit them in the appropriate format to the ACH or designated institution in the beneficiary's country. Phase two of its initiative is to start in September and involves creating a legal entity and choosing a contract to build the system.
"We are looking to start processing in mid-2002," said Ms. Taylor, who is the Watch program director at Nacha.
Ms. Rodee said Bank One is keeping close tabs on Watch.
"It is our understanding from what we have seen so far that it is a number of years off before there would be any real capability," she said. "If Watch were to do what I think everyone would like it to do, it would be to come up with a common format. Now the likelihood of getting to that wide-scale is probably going to be challenging."
Ms. Rodee said Bank One plans to develop a Web version of Global Payment Gateway, a Windows-based system, this year.
"We see this as having a potentially good fit with the business-to-business e-commerce things that are going on," she said.