Cross-border use of the automated clearing house network is picking up steam.
These international paperless transactions, virtually nonexistent two years ago, are reaching 10,000 a month.
They are currently possible only between the United States and Canada, but the National Automated Clearing House Association is promoting linkages of ACH systems around the world.
The interconnections would parallel the interdependence of economies and the mobility of populations, and could provide a cheaper alternative to expensive wire payments and less efficient paper drafts.
"We are trying to open up international ACH to all financial institutions," said Priscilla Taylor, director of network products with Nacha and a member of Nacha's cross-border council. Nacha is a Herndon, Va.-based rulemaking body for ACH payments.
Norwest Corp. and Toronto-Dominion Bank are the first to have heeded Nacha's call for banks to serve as ACH "gateways" to other countries since Nacha began promoting the concept in its 1994 strategic plan.
The two have been working on bridging rules, technical formats, and foreign-exchange-related concerns since 1996. Norwest sends the bulk of cross-border ACH payments, while Toronto-Dominion is still developing its system.
A payment initiated via Fed Wire or routed through a correspondent banking network can cost $15 to $30. Through a gateway, the charge is "under a dollar," said Keith Theisen, vice president at Norwest in Minneapolis.
"The other option would be to open a relationship with a Canadian bank, but even that gets very complicated for the average bank," he said.
David Kvederis, a former banker and currently chief executive officer of San Francisco-based Bankserv, an outsourcer of wire transfer services, was heartened to hear of new developments in cross-border payments.
He said such services were slow to evolve because of limited demand. But business would grow if the world's automated clearing houses were interconnected.
"A stable payments system is the first component of international commerce development," Mr. Kvederis, a former Wells Fargo Bank and Mellon Bank executive, said.
He saw the gateway concept as a temporary solution. He said the Federal Reserve should take a leadership role, for it has "the clout and respect with the central banks in all the other countries."
The Fed should hire a Nacha official to work as a liaison to the private sector, Mr. Kvederis suggested. "They ought to get it to the point where we do not need gateway banks."
The Federal Reserve system and Visa ACH Services, a subsidiary of Visa U.S.A., have indicated a strong interest in cross-border ACH payments.
Sarah Green, senior vice president of the Federal Reserve Bank of Boston, said the Rivlin Committee report, published earlier this year by a panel led by Fed Vice Chairman Alice Rivlin, stated the Fed should work with banks to support cross-border ACH. The central bank would follow guidelines developed by Nacha.
"We are looking at it and are trying to determine what role we can play," Ms. Green said.
Visa, one of three private-sector ACH processors that compete with the Fed, declined to comment on international strategies. Sources said it is developing a gateway service with a West Coast bank.
Another ACH operator, the New York Clearing House Association, said it is not interested in pursuing a gateway service. It would conflict with the cross-border operations of its member banks, said George Thomas, senior vice president.
"We may do something in the future, but right now it is not a priority for us," he said. "I see 64 billion checks to go after, before I see going after cross-border payments."
Citicorp, Chase Manhattan Corp., and a handful of others with extensive overseas operations offer proprietary cross-border payments services to customers and correspondents.
Banks and corporations already take appropriate measures to efficiently send and receive payments across borders, said Irene Gold, project leader for international direct deposit at the Social Security Administration.
Social Security, the largest nonbank originator of U.S. ACH payments, pays 386,000 expatriates monthly. Through an "interagency" deal with the New York Federal Reserve Bank, electronic payments going to Canada cost just 6 cents a transaction, Ms. Gold said.
"We are always interested in the concept of new cross-border technology, but at this time we have no interest in changing the arrangement we have in place," she said.
It remains to be seen how many banks, if any, will follow Norwest's lead.
The bank has made significant investments to integrate foreign exchange, compliance, and letter of credit components with its proprietary ACH system.
Mr. Theisen said corporations from all corners of the nation have opened accounts at Norwest to use the service, although none are yet originating in large volumes.
Norwest, which is second to Chase in ACH-origination volume, also sells a private-label version of the service to its 500 correspondent banks.
"It has been an interesting learning experience," Mr. Theisen said. "The demand we are getting means that it is definitely in the growth stage."
Nacha is working with Mexican authorities to develop a common set of rules for ACH transactions south of the border.