The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
Federai
mens
Winter 1997
News and Views
on Eighth District
Financial Services
Fees and Product Codes Decrease in 1998
Continuing the trend of
the past three years, prices
for the Federal Reserve's
ACH service will decline
again in 1998. Specifically,
fees to originate and receive
ACH items and addenda
records will fall by 0.1 cents,
and charges associated with
the delivery of composite ,
receiver file directories will
be eliminated.
We also are lowering
Fedwire fees. For the
second year in a row, the
origination and receipt fees
for funds transfers will be
reduced by five cents,
Fed to Offer
Financial
EDI Service
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
bringing the cost down
from 45 to 40 cents.
These price reductions are
consistent with the Fed's
long-term strategy to promote electronic payments,
and they are predicted to
save the banking industry
$15.6 million.in the upcoming year. We have been able
to lower our fees because of
greater operating efficiencies
after converting our wire
and ACH software to central processing sites for the
Federal Reserve System.
Lower prices are not the
only thing that will look
o help financial institutions prepare for EFT
T
99-the mandate requiring
most federal payments to be
delivered electronically by
1999-the Federal Reserve
System is planning to offer
its own financial electronic
data interchange (EDI) service in fall 1998.
Financial EDI is the electronic transfer of payments
and payment-related information, such as a remittance
advice, through the ACH
network. Data accompanying the electronic payment is
, placed in an addenda record
' attached to the ACH item.
"EDI-capable" financial
institutions have the ability
to translate this information
and pass it along to their
different on your billing
statement next year. In
January, we will change
several of our ACH product codes. Four new codes
will separate value and
nonvalue items. In
addition, the commercial and gov-
corporate customers in a
human-readable format.
If you have corporate customers that provide services
to the federal government,
being EDI-capable is very
important. When the government pays its vendors
electronically, information
will be included in the addenda record that will help these
companies reconcile their
account statements. Companies will look to their
financial institutions to
pass along this data with
the ACH payment.
In addition, the Social
Security Administration is
starting to include paymentrelated information in ACH
payments sent to representative payees, such as nursing
For a copy of our price
book or more information,
contact Cheryl Whitworth
at (314) 444-8713.
homes and mental hospitals,
to help them reconcile their
statements. These organizations also will be counting
on you to interpret this
information.
Our new software will
interface with FedLine
and enable you to translate
the data in ACH addenda
records. This will give more
financial institutions access
to financial EDI-translation
software. Also, we will be
helping bankers comply
with the NACHA rule that
requires most financial institutions to process EDI payments by September 1998.
If your financial institution
is interested in becoming
EDI-capable, contact your
account executive.
Windows NT Chosen as Exclusive
Fedline Operating System
he Federal Reserve
T
. System recently chose
Microsoft Windows NT®
as the exclusive operating
system for the new FedLine®
software after its transition
to the Windows platform.
The new software for
Windows NT will offer
several significant improvements over the current
DOS- based software:
• an in-depth online
"help" function at your
fingertips; and
"As always, Fedl,,ine gives
you the ease and independence to initiate all your
financial services online,"
says Gary Auer, customer
service analyst at the St.
Louis Fed. "FedLine for
Windows NT will make
tasks even easier."
The release of FedLine for
Windows NT is still a year
away, so for the time being,
we suggest you maintain
your DOS-based hardware
to run FedLine. As you
prepare for the transition
to FedLine for Windows
When Is EFT 99
Effective?
What About
Government Vendors?
The first part of the law
went into effect July 1996,
after which all newly eligible recipients of federal
payments must receive
their money electronically.
By Jan. 1, 1999, most
federal benefit recipients
will receive their payments
electronically, including
those who were receiving
payments before the mandate became effective
in 1996.
Companies doing business
with the government must
receive their payments electronically. However, in certain circumstances agencies
can pay vendors by check
when making the payment
electronically would be
more expensive, such as
one-time payments. Electronic payments will not be
required in situations that
are impractical or pose a
threat to national security.
Who Is Eligible
for a Waiver?
What if Recipients
Do Not Have Bank
Accounts?
• multitasking capabilities, which enable you
to use other applications
on your PC without
exiting FedLine;
What's the
Scoop on
EFT 99?
As fzmmcial mstitutio11s
preparations to
{!,Ct their employees llnd
customers ready for r I r
99, the /996 /aw thLlt
rcqzurcs most federLZI
fhrvments to he disl)l[rscd
elcctmmc.1/lv hy Ji,1mwrv
/ 999, we h,ll'l' rcceil'ed
111.my questions. To help
vou get u/J to s/1ccd 011
this import.mt initiatiue,
following 1s t1 summary
of sei crc1' key points.
1m1kc
1
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
• the ability to view and
delete queued transactions before sending
them to the Fed.
Some federal recipients
could be exempt from
EFT 99. In September, the
Treasury issued a proposed
rule that details who is eligible for a waiver. Recipients
with bank accounts who
were,receiving checks before
July 26, 1996, and those
who do not have accounts
at-financial institutions can
request waivers if receiving
electronic payments would
impose hardships due to
physical disabilities or
geographic barriers.
Recipients with accounts
at financial institutions
must receive their payments by direct deposit.
The Treasury's proposed
rule recommends that
recipients who do not
have bank accounts
open ones of their own,
or they will be provided
with Electronic Transfer
Accounts (ETAs) in their
names at financial institutions selected by the
Treasury.
NT, however, you may
need to upgrade your PC
to meet new hardware
specifications. Please note
that advances in technology
may alter these specifications before FedLine for
Windows is implemented
at your institution.
As we approach the conversion to the Windows
platform, the St. Louis Fed
will assist customers in this
transition. In the meantime, if you have any questions about the expected
hardware configurations
or are interested in previewing the NT Workstation
early next year, please call
Gary Auer in St. Louis at
(314) 444-8948.
ETAs will enable recipients to withdraw funds
through ATM machines
and point-of-sale terminals
using access cards. The
Treasury has not yet determined the exact structure
and date of when these
accounts will be available.
ETA recipients also will be
eligible for financial hardship waivers if they believe
the fees associated with this
account are too costly.
What's Next?
The Treasury currently
is reviewing all comments
on the proposed rule, which
were due December 16 1 and
will publish a final rule in
early 1998. Once it is in
place, the Treasury will
implement an extensive
public education campaign.
For more detailed information on EFT 99, contact
Cheryl McCarthy in St.
Louis at (314) 444-8459.
You also can visit the
EFT 99 web site at
www.fms.treas.gov/eft.
Start the New Year Off Right-Add Image
Cash Management to Your Service Line
Many Benefits for
W
Your Institution
ould you like to
offer a service that
will help your corporate
customers better run their
businesses? Are you looking for something to set
your institution apart
from your competitor
down the street?
If you answered "yes"
to any of these questions,
the Federal Reserve can
help. We offer a service
called image-enhanced corporate cash management
that will help your business
customers reduce storage
requirements, improve their
item retrieval process and
make it easier to reconcile
their monthly statements.
How does this service
work? At the end of your
customer's statement cycle,
you send their checks to the
Fed. We capture an image
of each item and store it
oa a CD-ROM. Your customer then will receive a
CD that contains digitized
images of their checks,
which they can view on
any PC with 16 megabytes
of RAM, a Windows cl\)
operating system and a
CD-ROM reader.
Companies that use outside
storage facilities to store
their checks can save money
by not having to pay for
this service.
Image-enhanced cash
management also makes it
easier for your customers
to retrieve items. Instead
of rummaging through
boxes of checks or reels of
microfilm to find an item,
they simply look it up on a
CD. All CDs come with
customized labels that make
it easier for companies to
Image-enhanced cash
management is more than
just a great service for your
customers-it is helpful
at your organization too.
It can provide you with
another source of revenue.
By pricing your cash management service higher than
the low fees the Fed charges,
you can make a profit.
You also can strengthen
your customer relationships.
By offering services that
. JI
C/-1
-
~
V'----- ~ - ~
'
j
lHECK.<,-
Perfect for
Companies That
Receive Many Checks
Image-enhanced cash
management is very useful
for any customer, especially
those that receive large
statements. These organizations devote substantial
resources to storing, filing
and retrieving their checks,
which can be time-consuming and expensive.
Using image-enhanced
cash management makes
these tasks easier. One of
the biggest advantages is the
storage space it saves. One
CD holds between 15,000
and 20,000 check images.
It takes between six to
nine standard check boxes
to retain this many items!
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
identify the contents. This
is a much quicker way to
locafr items and can save
your customers hours.
Finally, companies will
have an easier time reconciling their bank statements.
Because check information
is stored electronically, they
can easily manipulate the
data to meet their needs.
For example, if your account
statement lists items in order
by check number, items can
be arranged in this manner.
This is much quicker and
easier for companies than
sorting checks by hand.
improve your customer's
business, you earn their
trust and make them more
likely to try your other services. And the more services
a customer uses, the harder
it becomes for them to
change financial institutions.
"Our customers stay with us
longer if they use several of
our services," says Brian
Weide, cash management
officer at Citizens Bank
and Trust Company in
Paducah, Ky.
Offering image-enhanced
cash management also
shows customers you are a
forward-thinking financial
institution and a technology leader. "We take a proactive stance by providing
customers with an innovative service before they
ask for it," explains Weide.
"This shows that we anticipate our customers' needs
and remain on the leading
edge of technology."
Use It for Your
Own Needs
Even if you do not offer
image-enhanced cash management to your corporate
customers, you still ca.n use
it to save storage space and
improve the item retrieval
process at your institution.
Jim Foley, vice president
at Omni Bank in Pontoon
Beach, Ill., uses the service
solely for these reasons.
"We just don't have any
storage space, and this service has taken a lot of paper
off my shelf," says Foley.
"To store six months worth
of checks, all I need is two
CD-RO Ms."
This service also helps
Omni Bank respond to
customer inquiries faster.
"With image-enhanced
cash management, we save
a tremendous amount of
time looking up checks for
customers," explains Foley.
"I know I can give them
what they need in a matter
of minutes."
If you are interested in
learning more about imageenhanced corporate cash
management, contact your
local account executive.
ReserveNotes
Louisville Expands
Other Fed Availability
and Deadlines
If you are a Louisville
customer, you will enjoy
several big improvements
to the Fed's check services.
This past fall, the Louisville
office increased the number
of Other Fed RCPC endpoints with next-day availability from 16 to 36. In
addition, on January.1 we
are extending our Other
Fed deposit deadlinesfrom 8:30 p.m. and 12:30
a.m. to 8:45 p.m. and 1:30
a.m., respectively.
These changes significandy expand your RCPC
availability and allow for
later deposit deadlines, a
rare combination in the
banking industry. If you
have any questions on these
changes or would like an
updated check availability
schedule, contact Ron
Hadorn in Louisville at
(502) 568-9290.
Treasury Further
Extends EFTPS
Deadline
Important updates affecting corporate taxpayers
using the Electronic Federal
Tax Payment System
(EFTPS) recently have
been announced. To give
taxpayers time to learn
more about making electronic payments, companies required to file taxes
electronically beginning
on July 1, 1997, and
Jan. 1, 1998, will not be
assessed an avoidance
penalty until after July 1,
1998. (Taxpayers required
to file electronically by
Jan. 1, 1998, should have
received enrollment packages in August.)
In addition, the Treasury
has decided not to require
companies that fall in the
$20,000 threshold to use
EFTPS, but they still are
encouraged to take advantage of this easy, efficient
and time-saving method
of paying taxes. If you
would like to learn more
about EFTPS, call Nancy
Klages in St. Louis at
(314) 444-8707.
Account Executive
Returns to Illinois
Effective in January
1998, Illinois financial
institutions will begin
seeing a familiar face.
Andy Lueckenhoff, currently the ACH account
executive for the entire
Eighth District, will
return to his old stomping grounds and be
responsible for servicing
Illinois bankers on all
Fed services.
Lueckenhoff was the
Illinois account executive
for four years before he
switched positions in
the summer of 1996 to
focus solely on ACH.
Lueckenhoff brings with
him more than 20 years of
experience at the Federal
Reserve, having attained
extensive knowledge of Fed
services after working in
many areas of the Bank. If
you would like to schedule
a visit, he can be reached at
(314) 444-8647.
Payments Primers
Now Available
Training someone in the
methodologies of the various payment mechanisms
can be overwhelming, but
the Fed's Payments Primers
can help.
The Federal Reserve has
produced two informational
resources: an Emerging
Payrnents Primer, which discusses the fundamentals of
new payment products and
services, such as electronic
currency and home banking,
and the Traditional
Payments Primer, which
Free Direct Deposit
discusses more established
Statement Stuff ers
payment methods, such
Available
as check and ACH. Each
Are you looking for an
Primer contains a backeasy and inexpensive way
ground and description
to promote direct deposit?
of the product, describes
Let the Treasury help!
the flow of the payment
The Social Security Admintransactions from initiation
istration (SSA) is giving
through settlement and
away free statement stuffers
describes some of the key
that discuss how direct
actions related to that
deposit is more safe, conveproduct's development.
nient, reliable and dependThe Emerging Payments
able than checks.
Primer is now available
These stuffers are perfect
electronically at www.bos.
for including with account
frb.org/finance/empaymts/.
statements and handing out
The Traditional Payments
to customers cashing checks
Primer has just been proin your l(?bby. Two verduced in paper form and
sions of the stuffer are
will be available electroniavailable-one for banks
cally later next year.
and another for credit
For more information on
unions. , To order a supply,
these resources, contact
Mary Kuni in St. Louis at
fax your request to SSA at
., (314) 444-8715.
(410) 965-0384.
Take Advantage of the Treasury Investment Program
For almost 20 years, the
U.S. Treasury has offered
an investment opportunity
to Treasury tax and loan
(TT&L) depositary institutions-financial institutions
that accept and retain tax
payments from companies
and report the amount
received to their Federal
Reserve office. This
opportunity is called the
Treasury Tax and Loan
Investment Program.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Financial institutions participating in this program,
called note option depositaries, can keep the tax
payments received from
customers and invest it
instead of immediately
turning the money over to
the Treasury. Financial
institutions retain these
funds in open-ended interest bearing notes until the
Treasury withdraws,
or "calls," the funds.
How can you benefit
from this program?
Lower interest rate. The
interest rate is 25 basis
points below the Federal
Funds rate. You can profit
by loaning the money in
the Federal Funds market
or using it for other more
profitable investments.
You also benefit from
increased liquidity.
Participating institutions
retain customers' tax
deposits as a primary
source of funds, so they
have liquid investments.
A booklet describing
this program in greater
detail was distributed to
TT&L depositaries in
October. To obtain a
copy or to learn more
about the unique investment opportunities this
program offers, contact
Mary Sanders in St. Louis
at (314) 444-8509.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Financi
FCA Hits 40 with
aNewLoOk
H
ow do your costs and
performance compare
with those of your peers?
Are you spending too much
in a particular area? Are
you charging enough for
your products and services?
There is a fast, easy and
inexpensive way to
find out!
Since 1957, the
Federal Reserve
ha.s offered a
valuable cost
accounting
service called
Functional
Cost and Profit
Analysis (FCA) to
financial institutions of all sizes. This
year, the Federal Reserve is
celebrating the fortieth
anniversary of FCA with an
array of changes that make
the product more useful.
institutions that need more
detailed cost and product
information.
How It Works
Once a year, you submit
data to the Federal Reserve.
Your confidential information is used to create an
individualized, detailed
report specifically prepared for your institution.
This customized report
presents information you
can use to analyze income
and expenses in key operating areas. It also compares your institution's
current profitability with
a select group of peers.
As an added benefit,
you also will receive the
FCA national average
report. This allows you to
compare your performance
with other participating
institutions nationwide.
Two New Versions
of FCA
Now, FCA is available
in two versions that offer
different levels of cost
accounting and profit
analysis. FCA Basic is a
simple and easy way to
get started with a formal
cost accounting system.
Smaller institutions and
those unfamiliar with cost
accounting will appreciate
FCA Basic. Its scaleddown approach delivers
plenty of information
without asking for a
great deal of detailed
data from you.
If your institution has
more experience with cost
accounting or has participated in FCA previously,
FCA Plus is designed for
you. FCA Plus provides
more in-depth analysis for
A New FCA for
Today's World
Loretta McNeil, the
Federal Reserve System's
National FCA Marketing
Representative, notes that
"the demands placed on
financial institutions
today are very different
than they were just a few
years ago. These changes
are a reflection of changing regulations, increased
competition from financial
and non-financial institutions, and the dramatic
increase in the types of
products and services
being offered."
"The Federal Reserve has
recognized the changing
needs of financial institutions and has updated
FCA to provide effective
cost accounting informa-
tion based on today's
environment," observes
McNeil. "FCA is an upto-date product designed
to meet today's demands.
There is no better cost
accounting product available today at these prices
that fully meets an institution's desire to know its
costs, expenses and profits
down to the product line
and product level."
Customer Service
Is Included
The Federal Reserve is
committed to ensuring that
FCA is useful for today's
institutions. That's why
our staff is standing by to
help you with every step of
the process. We can assist
you with data collection
and help you understand
the information provided
in your individual and
national average reports.
In today's financial environment, knowing your
costs at a detailed level
is essential for survival.
That's why there is no
better time to participate
in FCA. You can learn
more about this valuable
service by contacting Dan
Horton in St. Louis at
(314) 444-8629.
EBT Plans Continue Across the District
Just as the federal government is trying to cut back
the number of payments
made by check, many states
are working toward the
same goal.
The Personal Responsibility and Work Opportunity
Act of 1996 requires all
states to distribute their
food benefits electronically by 2002. The electronic
disbursement of benefits is
called electronic benefits
transfer, or EBT. As states
prepare to adhere to this
law, many also are planning to convert cash benefits, such as Temporary
Assistance for Needy
Families (or TANF, formerly known as AFDC),
to EBT as well.
State governments face
a big challenge in helping
benefit recipients adjust to
receiving benefits electroni-
cally. Instead of distributATMs. EBT cards will be
ing food stamps, the govern- accepted at any store or
ment will provide recipients
ATM displaying the Quest®
with EBT cards, which are
sign, the nationwide logo
similar to debit cards.
for EBT transactions.
Beneficiaries can use their
How can you participate in
EBT cards to pay for food
EBT? By making arrangeat point-of-sale (POS)
ments with your ATM netmachines at grocery and
work to accept EBT cards;
convenience stores.
any certified ATM network
In states requiring cash
can sign up to provide EBT
benefits to be distributed
services. This will expand
electronically, recipients
the number of ATM transwho have accounts at finanactions at your institution
cial institutions will receive
and, subsequently, increase
their payments by direct
your revenue. You also
deposit. This is the governcan operate POS devices
ment's preferred way to disfor food stamp merchants,
tribute benefits because it
which will provide you
is less expensive and does
with a new source of POS
not require the issuance
transactions.
of plastic cards and pin
This is a good way to
numbers. If recipients do
provide services to the
not have bank accounts,
' unbanked and increase
they will receive EBT cards
your revenue. In addition,
that they can use to withexperience with other
draw cash benefits from
states already using EBT
shows that once they get
District EBT Schedule
used to having an account,
many beneficiaries develop
Arkansas: Pilot started in October 1997
good cash management
practices and expand their
Illinois: Statewide implementation completed in ,
banking needs.
November 1997
As states roll out their
Indiana: Pilot scheduled for January 1998
EBT programs, they will
Kentucky: Pilot scheduled for April 1998
send area bankers a letter
describing in more detail
Mississippi: Pilot scheduled for spring 1998
how to participate in EBT.
Missouri: Statewide implementation to be completed
In the meantime, if you have
by May 1998
questions on EBT, contact
Cheryl McCarthy in St.
Tennessee: Pilot scheduled for April 1998
Louis at (314) 444-8459.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
1r
It's On Us
If you have questions or
comments about any of
the Federal Reserve's
products or services, let
us pay for the <;:all., Our
toll-free phone numbers
are listed below.
St. Louis Office
1-800-333-0810
Little Rock Office
(in Arkansas)
1-800-482-9463
(outside Arkansas)
1-800-332-0813
Louisville Office
(in Kentucky)
1-800-292,-3596
(outside Kentucky)
1-800-626-4507
Memphis Office
(in Tennessee)
1-800-552-5132
(outside Tennessee)
1-800-238-5293
Volume 2, Number 4
Payments Quarterly is published
quarterly by the Financial Services
Office of the Federal Reserve Bank
of St. Louis. If you wish to obtain
aoditional copies or would like others
at your organization to receive
Payments Quarterly, contact Cheryl
McCarthy at (314) 444-8459.
F
E
D
E
R
A
L
R
E
S
E
R
V
E
FINANCIAL
SERVICES
@FedFRASER