Two powerful payment system associations are in a dogfight to define how a new breed of electronic check payments are settled.
The two groups - the Electronic Check Clearing House Organization and National Automated Clearing House Association- are vying for key roles in an Internet payment system being promoted by the Financial Services Technology Consortium, itself an association that includes some of the biggest banks in the country.
The consortium may end up the real winner by playing the two payments groups off against each other.
"We are not making it a secret," said Frank Jaffe, manager of the consortium's electronic check project.
"If we are able to establish an environment where the interbank clearing networks are somewhat competitive with each other, then eventually the prices will come down," said Mr. Jaffe who also is senior systems consultant at Bank of Boston Corp.
The two rivals - known by their acronyms, Eccho and Nacha - are advisory members of the Financial Services Technology Consortium, which was incorporated in 1993 by Citicorp, BankAmerica Corp., and about a dozen other institutions that wanted to explore and encourage development of advanced technologies.
Both clearing house groups are helping are helping the technology consortium develop the Internet-based system it calls E-check, and both are modifying their rules that would allow electronic checks to be processed in a fashion similar to that used for paper checks.
The consortium has successfully demonstrated Internet-based consumer payments and check truncation with Bank of Boston, Chemical Banking Corp., and Huntington Bancshares.
The clearing house association and the check clearing organization come at the problem from different directions.
The check clearing organization focuses on electronic presentment of checks, allowing participating banks to settle their payments directly with one another.
The clearing house association is the private-sector rule maker for a proven infrastructure, the automated clearing house network, for which E- check payments could be a source of additional volume.
Each group has placed the technology consortium's initiative high on its agenda.
"This is one of Eccho's priorities and we expect to adopt E-check rules by this fall," said Mary Ellen Baker, chairman of the organization's technology committee and senior vice president at Comerica Inc., Detroit.
Elliott McEntee, president of the Herndon, Va.-based clearing house association, said, "The ACH is going to play a major role in clearing and settling transactions that originate on the Internet.
"There are probably a half dozen banks that are using the ACH to clear and settle business transactions" that come from the Internet, he added.
"Ultimately, somehow, the market will determine which one makes the most sense," said Mr. Jaffe. He added that both could play "viable roles" in the technology consortium's future.
