It's called the Automated Clearing House network, and for about three decades this private nationwide X.25 data-processing system has been a workhorse pumping billions of dollars in collections payments between thousands of U.S.-based banks.
Employing ACH terminals to connect to the system, corporations use ACH for payroll direct deposit to employee bank accounts, and to credit or debit business partners' accounts, thus avoiding the use of paper checks. Though it's a dated, unglamorous packet-switching technology, ACH has long held the aura of a network used by the power elite.
However, that's about to change as the U.S. Department of the Treasury grafts a Web front end onto ACH, which will for the first time open its use to the common man and smaller businesses.
The goal is to get regular citizens to pay taxes, loan repayments, national park permits -- basically any fee owed the government -- via this Web front end instead of by check. The Web site -- www.pay.gov -- will be opened by the Treasury Department early next year.
"This is a service to the citizens that allows them to interact with the government online," says Gary Grippo, director of e-commerce at the Treasury's Financial Management Service division, which is spearheading the project. "We want people to come to the government Web page and say, 'You can debit my account to pay us, the government.' We get the authorization from you over the Web and then take the money from your account."
Every financial institution that offers checking accounts can handle ACH payments. The idea is that at www.pay.gov the individual could designate a checking account where deductions can be made for paying what is owed to the government, then fill out Web forms to pay these bills. The Web ACH payment would be processed in one day, as opposed to three for paper checks that are mailed.
Banks are preparing for the change. The bank group called the National Automated Clearing House Association, which sets rules for ACH processing, recently passed new ones related to Internet-based ACH payments. Each payment is sent as a message, and the new rules now include an "Internet" entry-claim code if the payment message was authorized over the Internet.
The Treasury Department is the largest ACH operator, processing 75% of all transactions, with Visa International -- its main competitor -- doing most of the rest. Visa and the Treasury Department do vigorously compete, Grippo says, but the Treasury Department is required under regulation to price services at cost so to not unduly affect the market.
"ACH is an old X.25 network, but we're trying to put an Internet front end on it to give more people access to it," Grippo says. Mellon Bank, Bank of America, BancOne and First Star are among the banks involved in the first tests of www.pay.gov this month.
Using the Web to debit a consumer bank account does bring heightened risk, which seems to be understood at the Treasury Department.
People who elect to become enrolled at www.pay.gov will be given personal identification numbers or digital certificates, and the Treasury Department will validate payment-authorization information online by accessing check-validation services and address-verification databases. The ACH authorization aat www.pay.gov will be very controlled, Grippo emphasizes, noting that it would be a mistake to try to commit fraud against the Treasury Department.
Eventually, www.pay.gov is expected to become the central Internet collection point for hundreds of federal agencies, which will be able to integrate the portal's payment-processing functionality into their own Web sites used by the public. The Alcohol, Tobacco and Firearms division at the Department of the Treasury, for example, plans to use www.pay.gov to accept payments for excise taxes owed by spirits importers.
For the common man who may worry about authorizing payments on the Web, Grippo points out that ACH rules give consumers 60 days to dispute an ACH transaction, although corporations only have three days.
The new Web-based ACH processing may result in the government not having to hire so many people to handle paper checks, Grippo says. But the Treasury Department does anticipate having to expand its call centers to handle Web-based e-mail and chat for www.pay.gov.