A West Coast payment systems group hopes to open its doors to the islands of the South Pacific, a move that could present an operational challenge.
The board of the Calwestern Automated Clearing House Association voted in October to expand membership to banks in the U.S. territory of Guam.
If banks in Guam do join, Calwestern must then somehow accommodate clearing, settlement, and processing schedules for banks that operate on the other side of the international dateline.
The Bank of Hawad, which requested the Calwestern board's vote, will report back to the Calwestern board on Jan. 14 as to whether any of the 20 banks based in Guam win join.
The Bank of Hawaii operates a private-sector ACH system, processing some two million transactions per month for about 90 financial institutions in Hawaii. It is positioning itself to perform the ACH processing for banks in Guam and other U.S. territories in the south western Pacific.
There is a precedent for such a move - the New York Clearing House Association, also a private-sector organization, processes transactions for institutions in the U.S. territory of Puerto Rico.
But the potential inclusion of Guam and other Pacific Rim territories or nations in a U.S. ACH system presents new problems. Because Guam is a day ahead of the U.S. mainland, banks there can never comply with the San Francisco Federal Reserve Bank's clearing, settlement, and processing rules.
"There are operational and maybe legal issues involved in going across the dateline," said Peter Yeatrakas, president of Calwestern. "We've never thought about these dateline issues before."
Calwestern does not process ACH transactions itself, but has contracts with the Fed and Visa.
Many banks in Guam, mainly because they are subsidiaries of U.S.-based banks, already send and receive, ACH items, transferring payments through their parent companies. But the banks in Guam, and in other U.S. territories like Samoa and Saipan, do not receive training in controlling risk or other issues that concern ACH members.
Volume Is Low
Right now, the volume of transactions among South Pacific islands, as well as the volume between Hawaii and the U.S. mainland, is still low.
Many banks just ignore the deadlines, said Peter Drewliner, senior vice president of electronic banking at the Bank of Hawaii and president of the Hawaiian Electronic Funds Transfer Association, which operates the private-sector clearing house.
"It doesn't hurt anyone, but it doesn't protect anyone either," Mr. Drewliner said. "Once there are disputes within the system, an originating bank could say the sender in Guam did not return an item on a timely basis, and there could be problems."
Guam, and other Pacific territories such as Samoa and Saipan, are centers of international trade, processing significant payment volume, Mr. Drewliner said.
He added that unusual circumstances often arise. A bank in Guam, for example, might return an item before a mainland bank would have expected it to have been presented in Guam. * By bringing Guam into the ACH, "we can avert potential problems," he said.