Banking and Technology Leaders Extend Checks to the Internet; Echecks Combine Existing Banking Infrastructure with Efficiencies of the Internet.

CHICAGO--(BUSINESS WIRE)--June 30, 1998--Leaders from the banking and technology industries today announced that the U.S. Government made its first payment over the Internet using an electronic check (echeck). The historic transaction is the result of a collaborative three-year research initiative to use the Internet to make check processing more efficient and open the door for widespread implementation by U.S. businesses.

The first echeck payment was issued by the U.S. Treasury's Financial Management Service (FMS) to GTE Internetworking in payment of a government contract. The payment was made from the Defense Finance and Accounting Service (DFAS), Columbus Center.

The echeck research initiative was conducted by the Financial Services Technology Consortium (FSTC), whose goal is to introduce new technologies into the U.S. banking system that will benefit both banks and their customers. The U.S. Treasury's FMS is the first participant in a 12-month market trial of echeck technology. Approximately 50 government contractors are expected to participate in the market trial by year-end, with a full-scale roll out expected by the year 2000. During the market trial, echeck payments will be issued from DFAS Columbus and Indianapolis Centers.

"As the recipient of today's first ever electronic check payment, we understand the opportunities this new electronic payment technology presents for the way business is conducted on the Internet. Given that Internet commerce needs the highest level of security, our three decades of experience in this area gives us confidence that electronic checks will provide a trusted vehicle for true business-to-business electronic commerce," said George Conrades, executive vice president of GTE Corp. and president of GTE Internetworking.

"Echecks provide customers with a familiar means of banking because they are very similar to the paper checks businesses are issuing today," said Frank Jaffe, FSTC vice president. "Customers receive the benefits of electronic commerce with the comfort of knowing that the echecks they're issuing are built on existing banking infrastructures and practices."

Echecks address the electronic payment needs of millions of businesses which exchange traditional paper checks with other vendors, consumers or the government. Echecks extend customers' existing checking accounts, follow the procedures used for issuing and cashing paper checks, and adhere closely to that legal and regulatory environment. Echecks provide a secure, trusted and verifiable Internet payment option for the marketplace and offer an easy entry into electronic commerce without having to re-engineer operations or make significant investments in new technologies or systems.

Like paper checks, echecks are signed by the payer and endorsed by the payee. However, echecks use digital signatures instead of handwritten or machine stamped signatures. Digital signatures are applied to echecks using a combination of smartcards and digital public key certificates. The combination of security technologies employed in echecks make it highly unlikely that they can be forged successfully, and the potential for fraud is expected to be much lower than for paper checks.

"The Financial Management Service is always seeking inventive ways to issue payments to recipients of Federal funds," said Commissioner Richard L. Gregg. "In our experiences delivering Federal payments, we have found that Electronic Funds Transfer is the best way to deliver those payments reliably, accurately and on time."

Commissioner Gregg added, "The Electronic Check pilot is one of many electronic money tests that Treasury is conducting to determine the viability of emerging electronic payment technologies. The Treasury is sensitive to the needs of vendors and other recipients who are being asked to shift to electronic payment."

The inherent security features in the technology's design satisfies the Treasury's stringent security requirements. The FMS, the Treasury bureau responsible for the U.S. government's payments, collections and central accounting functions, is actively seeking ways to comply with the Debt Collection Improvement Act of 1996, which mandates that all Federal payments, with the exception of tax refunds, be made electronically by January 1999. Echeck shows potential for providing a method for delivering electronic payments which will boost future electronic funds transfer participation.

In this market trial, the DFAS centers will make payments to U.S. Department of Defense (DoD) contractors using echecks that will be issued by the FMS. The DoD contractors will receive the echecks over the Internet using standard email services. They will then be able to view the echeck and an attached Advice of Payment document on a standard personal computer. After verifying the U.S. Treasury's digital signature, the contractors will endorse the echeck for deposit and send it to their bank, again using standard Internet email. The bank will receive the deposit, verify both the U.S. Treasury's signature and the contractor's signature, and enter the echeck into the existing clearing and settlement system, where it will go to the Federal Reserve Bank of Boston to be paid. The Federal Reserve Bank will debit the Government's account, and send the credit back to be applied to the contractor's bank account. This entire process will typically take place within two days, versus a week or more for traditional manual paper processes. The technology has the potential to reduce processing time to several hours.

In addition to the DoD, the U.S. Treasury, and the Federal Reserve Bank of Boston, companies providing expertise and services for the market trial include:

BankBoston and NationsBank are providing electronic checking services to their customers, using existing accounts

IBM led the design of the server architecture and is providing the echeck server systems used to process deposited echecks at BankBoston and NationsBank. Researchers from IBM's Watson Research Lab led development of the Financial Services Markup Language (FSML) and the Signed Document Markup Language (SDML), the underlying languages in the echeck infrastructure.

Sun Microsystems is providing the echeck server at the Federal Reserve Bank of Boston used in verifying the authenticity of each echeck payment, clearing (paying) the U.S. Treasury echecks, and settling the accounts between NationsBank, BankBoston and the U.S. Treasury.

IntraNet, Inc. is providing software to BankBoston and NationsBank to map echecks into a standard banking electronic cash letter format for electronic presentment to the Federal Reserve Bank of Boston.

GTE Internetworking is providing the Public Key Infrastructure (PKI) used to issue all digital signature certificates in the trial, and has also provided the high-assurance signing devices used to sign U.S. Treasury echecks.

IRE developed the smartcards used in endorsing echecks and signing payment files used between the Department of Defense, U.S. Treasury and the Federal Reserve and provides smartcard creation and distribution services from its SafeNet Trusted Services Center's secure operation facility. IRE has also provided its SafeNet network encryption devices used in communications between the Government agencies and between the U.S. Treasury and the Federal Reserve Bank of Boston.

RDM Corporation developed the software that processes payment instructions from the Department of Defense and issues the echecks at Treasury. RDM also developed the software used by the bank's customers to receive, process, and deposit echecks, and integrated these systems with encryption software from Certicom to ensure the privacy of the payments while they are sent through the Internet.

Certicom developed software used to encrypt email messages carrying echecks between the Treasury and payees, and between the payees and their banks.

BankBoston has served as the overall project coordinator for this FSTC project and managed the multi-vendor implementation of this echeck market trial.

The Financial Services Technology Consortium is a not-for-profit research and development organization comprised of banks, industry partners, financial services providers, technology companies, academic institutions, and government agencies. Founded in September 1993, the FSTC fosters the development of technology-based solutions to meet financial services industry needs and opportunities. FSTC sponsors project-oriented research and proof-of-concept activities on interbank issues, with a focus on interoperability requirements and standards. In addition, particular emphasis is placed on payment systems, electronic commerce, and information delivery. Current FSTC programs include: Bank Internet Payment System (BIPS), Electronic Check, NC/NetPC Banking Requirements, Risk Management, and Paperless Automated Check Exchange and Settlement (PACES).

For further information about echecks, please visit the FSTC's echeck Web site at www.echeck.org. For more information about the FSTC, its projects or its member organizations, visit the FSTC Web site at www.fstc.org, or call FSTC Headquarters at [phone].

Public Relations Contacts

NationsBank (nationsbank.com)

Tracy Boyce NationsBank Corporate Center 100 North Tryon Street Charlotte, NC 28255 [phone] Fax: [phone] [e-mail]

RDM (rdmcorp.com)

Dave Lant 4-608 Weber Street North Waterloo, Ontario N2V 1K4 [phone] Fax: [phone] [e-mail]

Federal Reserve Bank of Boston (frb.org)

MikeVersace Federal Reserve Bank of Boston 600 Atlantic Ave. Boston, MA 02106 [phone] Fax: [phone] [e-mail]

BankBoston (bankboston.com)

Kristen Habermann BankBoston 100 Federal Street Boston, MA 02106 [phone] Fax: [phone] [e-mail]

IRE (ire.com)

Barbara Kunetz Information Resource Engineering, Inc. 8029 Corporate Drive Balitmore, MD 21236 [phone] Fax: [phone] [e-mail]

IBM (ibm.com)

Mike Maney IBM Corporation RT 100 Somers, NY 10589 [phone] Fax: [phone] [e-mail]

GTE Internetworking (bbn.com)

Vaughn Harring GTE Internetworking 150 CambridgePark Drive Cambridge, MA 02140 [phone] Fax: [phone] [e-mail]

DFAS (dfas.mil)

Cathy Ferguson Defense Finance and Accounting Service Office Code: CE 1931 Jefferson Davis Highway Arlington, VA 22240-5291 [phone] [e-mail]

Sun Microsystems (sun.com)

Jessica Banfill GCI Group 188 The Embarcadero 5th Floor San Francisco, CA 94105 [phone] Fax: [phone] [e-mail]

Financial Mangement Service (fms.treas.gov)

Melody Barrett Financial Management Service Dept. Of Treasury Washington, D.C. 20227 [phone] [e-mail]

IntraNet (intranet.com)

Susan Feinberg IntraNet Corporation 1 Gateway Center Newton, MA 02158 [phone] Fax: [phone]

    CONTACT: FSTC
              Jim Luisi, 312/527-6724 (phone)
              [e-mail]
              or
              Gabrielle Abrams, 312/527-6724 (phone)
              [e-mail]