The electronic payments industry puts on a good front. The debit card-toting consumers it serves - whether they are using automated teller machines, point of sale devices, or the Internet - have come to trust implicitly a system that gives them cash or lets them make purchases safely and consistently.

Behind the scenes, it's a different story.

Processing and settling a transaction is not the smooth operation it appears to be. For many financial services companies and retailers, it remains a manual, time-consuming, and labor-intensive procedure.

If the volume of debit transactions were to hold steady, this might not be a concern. But transaction volumes are rising fast. Some predict that electronic debit payments will eclipse credit card payments by 2006. Processors that stick with the status quo will see service levels drop, operational costs increase, and systems crash.

The first EFT networks, in the mid-1970s, were innovative for their time. They were created to satisfy a young but burgeoning ATM industry's need to reconcile funds among banks and to capture data to answer cardholders' questions.

The networks worked smoothly most of the time, handling a small but growing number of transactions. But as consumers became comfortable with ATMs and the number of transactions soared into the billions, processors responded with only a few technology upgrades. In fact, some networks still use the same antiquated technology developed 25 years ago.

Of course, EFT networks transfer much more than just ATM transactions. They deliver data from online and offline debit cards at the point of sale, smart cards, electronic checks, electronic benefit transfers and electronic bill payments, and Internet payments.

Online, there were nearly three billion PIN-based card transactions at the point of sale last year, up 35% from 1998, according to Dove Consulting. Offline, signature-based debit card transactions rose 38%, to nearly 4.5 billion.

This has been good news for EFT processors, as they have watched profits rise with transaction volume. But managing the overwhelming surge of transactions - numbering in the billions for large processors - has become a challenge.

Processors need to take a hard look at systems to see whether they are really ready for the expected increases: Are settlement deadlines consistently met? Are data easy to view? Are reports flexible and accessible? Are exceptions resolved quickly?

Powerful systems are required to manage transaction volume, and leading software programs offer major improvements in cash management, time-savings, and back-office cost reductions over applications developed even a few years ago.

One such improvement is continuous settlement, considered the "killer app" in the processing world. Currently, most processors follow the same routine: start batch processing at the end of the business day (usually 6 p.m.), with a deadline four hours later for settlement reports. Increasing transaction volume is often causing data logjams that slow the process down and make deadlines tougher to meet.

The new software enables transaction data to flow through the system all day. Transactions are still settled at day's end, but the process is completed in a few minutes rather than the hours that older programs require.

Continuous settlement also balances and reconciles a business day online rather than through paper reports. The day's totals can be viewed on a desktop PC, and the information sent to customers in any format - e-mail, fax, or hard copy. Reports are easy to produce and can be created from any position, including the processor, institution, merchant, or device.

The software also permits real-time monitoring of funds movement and cash positions. It indicates, for example, how much a single teller machine has dispensed or received at any point in the day. This is valuable cash-management information.

Real-time updates are a critical service feature. If someone is short-changed at an ATM, for example, a service representative can access an online database, enter a number of variables - range of business dates, ATM number, or account number - and retrieve the information instantly, even while the customer is on the phone. In the past, everyone had to wait until day's end to pinpoint a transaction. If the discrepancy occurred a week or more earlier, it sometimes took as long as two weeks to resolve.

Processors cannot keep up the front much longer. What worked in the past may work still work - clumsily - for a while, but not for the long haul. Rather than merely getting by with existing software, they must assess processing operations and act now as the payment world continues to go digital.

Mr.Roberts is director of software product management for Milwaukee basd eFunds Corp., the largest third-party electronic funds transfer producer in the United States and a developer of continuous settlement EFT processing software.

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