The Financial Services Technology Consortium, a group of prominent banks, technology vendors, and research institutions, last week demonstrated a purchase over the Internet.
The transaction, a $24.95 purchase of a teddy bear from an on-line gift shop, was conducted in a specially designed room at the main offices of BankAmerica Corp. in San Francisco.
Experts consider the demonstration a significant step in the consortium's effort to develop electronic alternatives to the check payment system.
"This is the first collaborative effort by major banks and their industry partners to develop from inception a new financial standard," said Daniel Schutzer, the consortium's president and a vice president with Citicorp.
John Doggett, a director of applied technology with the Bank of Boston Corp. and a project director with the consortium, said the prototypical transaction was a success on several fronts.
"Not only did the demonstration work successfully, but we also demonstrated that this group can successfully work together to develop a technology infrastructure for the common good of our industry and the customers it serves."
Frank T. Carnella, a senior vice president of Chemical Banking Corp., initiated the transaction. The teddy bear was purchased on behalf of Vice President Albert Gore in symbolic thanks for his encouragement of the development of the information superhighway.
First, Mr. Carnella browsed the home page of PC Gift and Flowers of Oakton, Va., which mostly sells stuffed animals, flowers, and gourmet foods.
After making his product selection, he inserted a card into a PCMCIA slot on the side of the PC terminal. Such slots - the acronym stands for Personal Computer Memory Card International Association - accommodate cards roughly the size of credit cards and are most common in laptop computers, where they are used for plugging in tiny modems, hard drives, and the like.
The resulting electronic check then was sent by E-mail to the merchant's terminal, where it was validated that the check was written by an authorized person.
Next, PC Gift and Flowers electronically endorsed and forwarded the check for deposit over the Internet to its account with the Bank of Boston.
After receiving the check, the bank sent it through internal links to its automated clearing house network connection. It wrapped the payment within the ACH's Corporate Trade Exchange format and submitted it to Chemical Bank.
"The beauty of this program is that it's a bona fide use of electronic commerce in a form that everyone is intimately familiar with," said Adam Backenroth, a vice president at Chemical Bank and a senior member of the consortium.
The group expects to have about 1,000 users in a pilot in early 1996, and can "easily expand the program to meet additional demand from banks' merchants and consumers," Mr. Backenroth said.
The electronic check is the consortium's first major achievement. The group, which was formed in 1993, is also working on an interbank check image system and on a consumer and commercial fraud prevention and management system using biometric technology, fraud pattern identification, and cryptographic authentication.
The consortium's bank members are Banc One Corp., Bank of America, Bank of Boston, Bank of Montreal, Chemical Banking Corp., Citicorp, Huntington Bancshares, and Wells Fargo & Co.
Participating nonbanks include Bolt Beranek & Newman Inc., Equifax Check Services, International Business Machines Corp., National Semiconductor Corp., Sun Microsystems Computer Co., and Telequip Corp.
Advisory members of the FSTC are the National Automated Clearing House Association and the Electronic Check Clearing House Association.