IRS Picks 1st Chicago and NationsBank to Build Electronic Payment Systems
Epper, Karen, American Banker
First Chicago Corp. and NationsBank Corp. have snared lucrative contracts to help the federal government develop and launch an electronic tax-payment system.
As "financial agents" of the Treasury Department, the companies will collect tax payments on behalf of the Internal Revenue Service, using electronic data interchange and funds-transfer technologies now chiefly employed in the remote-banking field.
Under the arrangement, companies and individuals will be able to pay their taxes electronically, using personal computers, telephones, mainframe computers, and point-of-sale terminals.
In awarding the business to the banking companies, the federal government has underscored its intention, voiced repeatedly in the past year, to pull out of the payments-processing business.
The move clears the way for banks and other financial companies to sweep in and create innovative remote-banking opportunities, as well as a substantial new line of income.
First Chicago executives estimate this business will generate more than $400 million in revenue over the life of the seven-year deal. NationsBank officials would not provide any such projections.
The U.S. Treasury Department expects that within five years, about $1 trillion in tax revenue will be collected electronically, saving the government a projected $433 million by the year 1999 if all goes well.
The two banks, selected from a field of six potential candidates, will design their systems separately through partnerships and subcontracts with other banks and financial-services companies. …