Clearinghouses to Test Private Lines

By Garsson, Robert M. | American Banker, May 25, 1984 | Go to article overview

Clearinghouses to Test Private Lines


Garsson, Robert M., American Banker


NEW YORK -- Automated clearinghouses in New York and California could begin using private lines to transmit electronic payments as early as next month, said the head of one of the institutions.

If that test succeeds, it would be one more chink in the Federal Reserve System's near-monopoly of the automated clearinghouse network, an electronic substitute for the check-clearing system.

"We have been talking to General Electric and to McDonnell Douglas to see if we can access their lines," said John Lee, executive vice president of the New York Clearing House, which operates the New York Automated Clearing House.

General electric Information Services Co., a subsidiary of General Electric Co., was recently awarded a contract to provide a private-sector automated clearing house service for the Calwestern Automated Clearing House Association, which serves California, Hawaii, Nevada, and Arizona.

Both General Electric and McDonnel Douglas Automation Co. are bidding to provide a nationwide private-sector service for the National Automated Clearing House Association and so are natural choices for the New York initiative.

Mr. Lee said the Calwestern association would probably participate in a test with his clearing house.

"We will probably start with one bank and one customer on each side," he said, adding that initial volume would be very small, perhaps no more than a few hundred transactions a day.

"For example, what you would see is Chase transmitting to our computer center by direct line and we would go out on a private line, maybe GEISCO's to Calwestern. They could transmit directly to Wells Fargo, for example, and they to their customer," Mr. Lee explained.

What is important, he said, is that in no part of the process would a magnetic tape be created. All transactions would be transmitted over data channels, from the customers to the bank to the clearinghouse and on to its final destination. …

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