Washington April 25, 2001 The New York Clearing House (NYCH) this week announced a major initiative to provide an Internet-enabled global payments infrastructure to support B2B e-commerce by summer 2002.
The banking industry has been talking for some time about moving away from paper checks and toward an Internet-compatible electronic payments system. But the high costs that would be involved in building such a system from the ground up have stymied progress. In announcing their plans, NYCH officials stressed that their approach would eliminate the need for each individual bank to invest in functionality.
"The key to successfully implementing an Internet-enabled payment system is to maintain or upgrade the current payment systems and take advantage of the security, reliability and universal access of the current infrastructure," said Jeffrey Neubert, CEO of the New York Clearing House.
"We set out to reduce the friction in B2B commerce without reinventing the wheel," echoed George Thomas, senior vice president at the clearinghouse. Speaking at the Electronic Payments Association's annual conference, Thomas said that the NYCH's goal was to deliver payments with full remittance information through a system that leverages existing systems infrastructure.
Thomas described the role of the NYCH as assisting the banking industry in an evolutionary transition from the existing data standards (e.g., X12, EDIFACT) to the new standard based upon XML (Extensible Mark-up Language).
The new Internet-enabled enhancements will be integrated in the NYCH's two flagship services, the EPN and CHIPS payment platforms. The new capabilities will allow each platform to include all information required to post and reconcile payments by capturing, storing, translating and delivering payment remittance information.
"Successfully moving electronic payments to the Internet requires several key components that only a payment system operator like the NYCH can provide," asserted Thomas. "First, you have to have a flexible electronic payments infrastructure that embraces current payment platforms and a system that allows all trading partners a common means of exchanging secure, final, and risk-free payments. Finally, you also need a payment method that includes risk management and information access and delivery."
One key feature of the planned enhancements is a Universal Payment Identification Code (UPIC) that the NYCH says will protect against fraud and makes initiating payments easier. Banks will establish an UPIC with the NYCH for their business customers. The UPIC will "mask" confidential data such as the businesses' bank account and bank routing numbers, and the code will stay with the company regardless of whether they change banks or move to another city or state. Plans call for this capability eventually to be extended to individuals, affording the same level of security and fraud protection to the general public.
The new capabilities will be introduced later this year and will be fully implemented by summer 2002, according to the NYCH.