Communications of the acm

E-P
AYMENT
O
PTIONS
Three notable e-payment technologies promise to
simultaneously address key adoption challenges, accel-
erate B2B e-payment adoption, and deliver across mul-
tiple value dimensions: 
• ACH-based bank proprietary e-payment platforms; 
• Enhanced purchasing card technology; and 
• Open network systems. 
For businesses, they offer potential financial, human
resources and time savings, along with streamlined
processes that have long been promised from revolu-
tionary payment systems. Financial institutions will
find that providing them to business customers can
strengthen their product portfolios, provide an oppor-
tunity to expand relationships with existing customers,
and attract new customers who seek e-payment effi-
ciencies (see Table 1). 
ACH-B
ASED
B
ANK
P
LATFORMS
ACH-based transactions (such as for direct deposit of
employee salaries) have existed in one form or another
since the early 1970s. Bank proprietary systems are e-
payment solutions built on the ACH network. In the
past decade, banks have invested heavily in developing
software packages that have improved the functionality
of B2B ACH transactions. They now combine finan-
cial processing and electronic data warehousing capa-
COMMUNICATIONS OF THE ACM
June 2007/Vol. 50, No. 6
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June 2007/Vol. 50, No. 6
COMMUNICATIONS OF THE ACM
[1]. B2B payments involve
up to five distinct compo-
nents: 
• The buyer purchases
goods and services; 
• The buyer’s financial
institution provides
banking services to the
buyer; 
• The supplier provides
goods and services; 
• The supplier’s financial
institution provides
banking services to the
supplier; and 
• The Federal Reserve or
other check-clearing
institution facilitates the
check-sorting process. 
Figure 3 outlines the tra-
ditional B2B check-clear-
ing process in which a
buyer writes a check that
subsequently flows through
the supplier, the supplier’s
bank, the Federal Reserve
(or other check-clearing
institution), the buyer’s bank, and finally back to the
buyer. This process is supported by human intervention
throughout the supply chain, including manual entry of
check amounts and associated transaction data. 
Shifting payment processes to an electronic format
requires an IT infrastructure to route payments and
related data through an integrated network. Using such
end-to-end infrastructure poses a significant adoption
challenge because users’ technological sophistication
with regard to the payment supply chain is so varied.
Creating uniformity in the e-payment infrastructure is
further complicated by the fact that the standards of
the Federal Reserve infrastructure apply to Fed prod-
ucts but not to products outside the Fed’s domain.
Therefore, building the infrastructure necessary to
securely and reliably transmit e-payments and related
transaction information among a large group of diverse
users is a significant obstacle and expense. However, the
result of an improved payment network, as in Figure 3,
is a streamlined process supporting the continuous
exchange of information and funds. 
Remittance standards. 
Complicating these challenges
is a lack of even minimum standards pertaining to e-
payment data. Although the Federal Reserve has long
promulgated standards to guide the type and format of
information associated
with both paper- and
ACH-based payments,
invoices, and receipts, the
related guidelines do not
exist in the world of e-pay-
ments. Consequently, dif-
ferent types of e-payment
systems have evolved to
integrate and support
three levels of transaction
information: 
Level 1. 
Standard purchase
information, including
merchant name, transac-
tion amount, and date; 
Level 2. 
Summary detail,
including point-of-sale
codes, sales tax amounts,
and accounting codes;
and 
Level 3. 
Line-item pur-
chase detail, including
sales quantities, product
codes, product descrip-
tions, and shipping data. 
Early adopters of e-payment technologies still com-
plain that inconsistencies in remittance standards have
resulted, in some cases, in the corruption of important
remittance data, including invoice numbers, and other
information, including payment amounts and payer
identification [8]. 
As e-payments become more widely accepted, niche
players in the e-payment industry must coordinate and
agree to facilitate efficient networks. E-payment users
want information formatted so it can be processed
“straight through” to internal systems. Recently, the
Clearing House Payments Company, the first and
largest U.S. payments clearinghouse, released a plan to
help catalyze standards convergence. Collaborating
with bank owners and payment technology vendors, it
adapted the traditional EDI 820 file—the standard
EDI payment file format—trimming it down to 10
essential fields. Before this modification, EDI 820 files
included hundreds of fields, creating problems for
some trading partners if senders used too many or too
few of them. The simplified e-payment network 820
format was approved by the American National Stan-
dards Institute (www.ansi.org) and is today broadly
accepted by industry participants. This coordinated
effort or one like it should hasten the acceptance of e-
payment systems [12].