Some of the world’s largest banks are backing a proposed industry standard that promises to secure business-to-business payments over the Internet and bolster straight-through processing (STP), or the ability to clear payments in a single day instead of the three days needed now.
Dubbed Project Eleanor, the proposed standard and its software for linking back-end systems would establish online authentication methods for banks and vendors and create standard database fields for computer-to-computer transactions. It’s expected to be in place by mid-2002.
Identrus LLC, a New York-based vendor formed by a consortium of banks that has been building a public-key-infrastructure-based global system, has assumed ownership of Project Eleanor, which was originally a joint venture of several financial institutions.
ABN Amro Bank NV in Amsterdam, HypoVereinsbank in Munich, Germany, Sanwa Bank/UFJ in Tokyo and Wells Fargo & Co. in San Francisco are conducting in-house pilots of Project Eleanor. There’s also a second wave of financial institutions that are planning to join the pilot program during the first half of the year.
Peter Landsmann, director of electronic banking services at HypoVereinsbank, said the major costs associated with Eleanor will involve integration with older back-end systems. But it will be worth it, he said.
“This will mean more straight-through processing for all the different participants: buyers, sellers and banks,” said Landsmann, who estimated that integration would cost his bank less than US$10 million. “Eleanor will offer risk management, timely information and integration into back-end systems, thereby streamlining processes,” he added.
Agent of Change
Wells Fargo has already installed Project Eleanor’s software from Sun Microsystems Inc.’s iPlanet E-Commerce Solutions on independent servers. The bank plans to begin a six-month pilot next month.
Jane Hennessy, a senior vice-president at Wells Fargo, said that what attracted her company to the project was that payment terms can be built into the software and it has identification authentication from Identrus.
“This could result in much greater control of cash flow. We’ll be able to do transactions online without having to go off-line for payment initiation,” she said. “I think it would change things dramatically for our customers, particularly those doing international transactions.”
According to Needham, Mass.-based TowerGroup, the global securities industry will spend US$19.2 billion on STP projects between now and 2004. Global banks are making heavy investments in an STP standard because a single payment and clearing standard would simplify conversion to local currencies and adherence to local regulations. That’s because transaction rules would be built into software by in-country vendors or banks.
“The point is that currently, over-the-Internet companies first [make a sale] and then go off-line to close the deal and do the clearance using their respective software,” Landsmann said. “You have two work streams: the purchasing work stream…and a payment work stream. With Eleanor, all of this can happen in one process.”