Midsize financial institutions across the country, previously reluctant to make significant investments in funds transfer automation, are expressing great interest in an innovative funds transfer system they hope will give them an edge over larger competitors.
Fundtech Corporation, of San Francisco, a software developer specializing in funds transfer technology, has specifically designed its new FEDplu$ system to address those needs. FEDplu$ automatically links with FedLine, a Federal Reserve System service for domestic funds transfer, which currently is used by over 10,000 financial institutions.
Several years of research have gone into the creation of this cost-effective, turnkey system, designed with input from over 20 banks to address the broadest range of concerns related to the funds-transfer process. The result is a highly automated, versatile system that increases productivity, reduces risks, and enhances service for financial institutions with between $250 million and $7 billion in assets.
"Whatever your wire volume, you need this type of software, because rather than having to use multiple products, everything is integrated into one," says Elsa Zavala, Vice President and Director of Data Processing at Chino Valley Bank in Ontario, California. Ranked among the most profitable banks in California, Chino Valley, with $800 million in assets, is the first live FEDplu$ installation; the bank has plans to extend the system to 19 of its branches. FEDplu$ is also currently being installed in additional banks in California and on the East Coast.
"FEDplu$ brings a level of sophistication and efficiency to the funds-transfer process that was not previously possible," says Michael Rawding, worldwide marketing manager. financial services, Microsoft Corporation, "and it powerfully demonstrates how Microsoft's tools can be applied to a specific area in banking to generate a solution with excellence for its users. "
FEDplu$ is a total client/server package, requiring no up-front investment. It incorporates Microsoft Windows NT Server, Microsoft Mail Server, and Microsoft Windows For Workgroups, in addition to Fundtech's proprietary software, which includes SWITCHplu$, an advanced, fault-tolerant "middleware" layer. Windows NT enables FEDplu$ to operate cost-effectively over a wide range of processors. serving banks with under 50 wires a day up to those handling several thousand wires. Also, because FEDplu$ incorporates Microsoft tools with Windows-based graphics, operator learning curves are short and using the system is exceptionally easy
The FEDplu$ system allows bank branches and corporate customers to automatically initiate funds transfers via remote PC or fax, making it unnecessary for wire-room personnel to re-key information--a labor--intensive process in which costly errors may occur Instead, incoming requests are automatically received by the Microsoft Mail Server. A test key and electronic signatures ensure the security of transactions through all processing stages; and FEDplu$ software automatically recognizes the customer. charges appropriate fees, and detects unusual risk factors and possible duplicate transmissions. It also generates a complete, protected transaction record for security and auditing purposes. The system then sends fax or e-mail advices back to the initiating branch or corporation.
TRANSFER TO PROFITABILITY
Customers can know with certitude that a transaction has taken place within minutes of its completion. This valuable service enables customers to more effectively manage their financial resources and raises their comfort level. As more customers become aware of FEDplu$ capabilities, certain funds that were previously sent through ACH or other means will be sent via the funds-transfer system, resulting in higher fees.
"The notification and automation features of FEDplu$ are highly attractive to corporations that are trying to decide where to do their banking business," says Fundtech Senior Vice President Joseph P. Mazzetti. "FEDplu$ effectively turns funds-transfer, which is typically a gray area in back office operations, into a new profit center and selling point."
REDUCED COMPLIANCE HEADACHES
In addition to the revenue-generating and cost-cutting potential of FEDplu$, the system directly addresses federally mandated compliance issues, which will present increasing demands on back office operations in the coming years. This has become a source of major concern to many financial institutions, which are looking for ways to contain future operational costs.
The Fed and the U.S. Treasury, for example, require that financial institutions check all wire requests against the Office of Foreign Asset Control (OFAC) list to prevent money from getting into the hands of individuals or groups posing threats to the country's security. This so-called "hot list" is subject to periodic updates. Achieving compliance with the requirement manually is time-consuming and uncertain. Substantial fines are levied for infractions. FEDplu$ automatically checks wire requests against the current OFAC database to ensure compliance.
Additionally, complying with recent changes to the Bank Secrecy Act "popularly called the" Money Laundering Act that go into effect in January 1996, will be considerably more daunting. Financial institutions are required to keep records of all wires over $3,000 and to be able to access these records if a federal investigator or auditor inquires about a particular customer's transfers of money and patterns of funds movement.
For most midsize financial institutions, these records are in paper form, filed or stored in boxes at the bank or an outside storage facility If an institution is queried about a wire dating back several months or years, or if an analysis of an account's transactions over time is requested, with a manual system this is a costly, arduous task. FEDplu$ handles this difficult research problem easily and efficiently. The system stores such data on WORM (write once, read many) optical disks, allowing computer analyses of transactions going back five or more years.
GETTING INTO POSITION
FEDplu$ also provides for real-time monitoring by a financial institution of its Federal Reserve position. This allows a bank's treasurer to leave a smaller cushion of funds idle at the Fed to avoid overdrafts, promoting higher returns.
Security and fraud prevention is another area in which FEDplu$ excels. Advanced encryption techniques are used to ensure the integrity of transactions throughout processing. The system also incorporates comprehensive accounting procedures and access controls, including the latest smart-card technology These features make the system virtually tamperproof, substantially limiting an institution's exposure to fraud.
"Banks have told us that many of the features of FEDplu$ are only available in much larger institutions, where significant investments in technology have been made," says Mazzetti. "Fundtech has made that investment in the application. We have also created the necessary infrastructure, like SWITCHplu$, which takes a PC-based platform in a client/server environment to a level of continual operation that previously has not been achievable."
In sum, says Microsoft's Michael Rawding, "FEDplu$ is a wonderful example of the financial systems of the future."