CoreStates Financial Corp. has developed a service that lets corporate customers make automated payments through automated clearing house debits.

Such transactions, in which third-party payees withdraw funds directly from corporate payers' bank accounts using the ACH network, have been unpopular with some corporations because of fears that accounts will be compromised.

By contrast, ACH credits, in which corporate treasurers initiate the move of funds to a payees' bank account, have been a preferred method of payment.

But CoreStates executives said fears of ACH debit are unfounded. Further, ACH credits carry with them operational burdens that can hurt a corporation if not handled properly.

For these reasons, CoreStates has decided to "stand up, raise our hands, and vote for the debit," said Thomas A. Gregory, vice president at Philadelphia-based CoreStates.

Experts said the debit-versus-credit debate is growing louder as more companies are required to file taxes electronically. Under a provision of the North American Free Trade Agreement, about 90% of U.S. companies will be required to file tax payments electronically by 1999. (See story below.)

CoreStates' service, up and running since June, initially was designed to help Mobil Corp. deal with a multitude of tax payments.

Mobil, which has 600 wholly owned and 7,700 franchised service stations, had found it increasingly burdensome to tailor ACH credit payments for federal, state, and municipal taxes, and for lottery payments.

With the ACH credits, Mobil was required to fund tax authorities' accounts in very specific ways, using a variety of electronic formats. Any errors in filings delayed processing of the payments and resulted in financial penalties.

Complicating matters, the ACH credit transactions did not feature a return receipt, which meant Mobil had a tough time figuring if tax authorities had received payments on time.

Mobil officials said there are no such problems with the debit payment.

"Our preferred method is now the ACH debit," said Richard G. Head, a Fairfax, Va.-based manager of banking operations at Mobil. "It takes the pressure off."

He said Mobil's senior management gradually leaned in favor the debit after taking a hard look at the risks associated with credits.

"We are working on a state-by-state basis" to convert tax payments to the debit, Mr. Head said. "Some of the larger ones, such as Florida, where there are over 100 stations, are all using the debit."

In other regions of the country, Mobil and subsidiaries still perform ACH credit transactions or payments via the Fed Wire system, which is operated by the Federal Reserve banks.

CoreStates' service makes use of standard electronic data interchange format called the 820. (Electronic data interchange, or EDI, is the automated exchange of business documents in standard computer formats.)

Mobil generates an EDI transaction that informs CoreStates when a debit payment is expected, and the amount of the payment.

When the IRS executes the debit, CoreStates matches the transaction against an electronic list in the 820 transaction.

The service-which some liken to positive pay services used in paper check transactions-assures that debits being made are expected by the company from whose account funds are being withdrawn.

Unauthorized debit requests are pulled out for scrutiny, thus providing corporations control over their accounts.

"It has been a fruitful relationship on both sides," Mobil's Mr. Head said. The service "delivers what it was intended to."

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