A group of state government associations has asked the National Automated Clearing House Association to develop a certification process for electronic transactions.
The National Association of State Purchasing Officials of Lexington, Ky., and two Washington-based groups-the National Association of State Information Resource Executives and the National Association of State Auditors, Comptrollers, and Treasurers-want to use digital certificates to ensure security in their dealings with the public over the Internet.
They see Nacha-given its experience establishing rules for paperless payments, including Social Security direct deposits-as a natural choice to define secure methods for accepting marriage license fees, parking fines, and the like electronically.
"The overwhelming majority of states are interested in exploring the Internet, and they all agree that you need to have the ability to do secure transactions," said William Kilmartin, treasurer of the Commonwealth of Massachusetts.
Digital certificates serve as the equivalent of a driver's license or passport, vouching for the holder's on-line identity. The assignment and management of certificates are often given to a "trusted third party," a role that some banks have considered playing.
State governments "understand the logic of why it is necessary to put into place this type of accreditation process," Mr. Kilmartin said.
The state groups' choice of Nacha came after a four-month search that began with a request for proposals.
The association would be precluded from becoming a certificate authority, but its participating banks would be permitted.
A Nacha working group, the Internet Council, will spend the next six months drafting procedures for approving certificate authorities.
Nacha, based in Herndon, Va., is generally interested in emerging Internet payment opportunities. Such transactions ultimately may result in transfers of funds via the ACH network, an operation that largely piggybacks on the Federal Reserve's wire network.
Ann Friedman, department manager of commercial cards at Chase Manhattan Corp. and a member of the Internet Council, said Nacha's member and participant list goes far beyond banks to include government entities and many types of corporations. Visa U.S.A., like the Fed, is a processor of ACH transactions.
"Nacha is really just a place for all the stakeholders to come together to determine how we need to play," Ms. Friedman said.
Elliott McEntee, president and chief executive officer of the clearing house organization, said its Internet Council will attempt to resolve several important questions for banks, such as how to make the business case for serving as a certificate authority and how to make the necessary warranties and guarantees.
"We are very pleased and proud that the states have expressed a vote of confidence in us," Mr. McEntee said.