ANSI - American National Standards Institute
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Federal Reserve Relies on Voluntary Standards to Reduce Cost and Upgrade Efficiency of Check Processing

Fed Adopts X9 Standard for Electronic Check Exchange

New York, Feb 28, 2002

The Federal Reserve, the single largest, nationwide processor of checks, will adopt an American National Standard (ANS), emanating from the ANSI Accredited Standards Committee (ASC) X9,> Accredited Standards Committee (ASC) X9, to reduce costs and upgrade the efficiency of its check processing system; full implementation is scheduled to take place by mid-2005.

Patrick Barron, Atlanta Fed first vice-president and chief operating officer, commented on the need to standardize the agency's multiple check processing formats: "The Fed presently supports about 70 different formats across our 45 check processing sites. … We need a set of standards that provide maximum opportunity for efficient interchange of check payments..." that "frees [the agency] from the burden of multiple formats."

Banks rely heavily on magnetic ink data to credit, sort and pay billions of checks annually. "One of the chief obstacles to [electrifying] paper checks," explained a Fed spokesman, "was the lack of uniform exchange standards." In adopting X9's Specifications for Electronic Check Exchange (X9.37), the Fed will exploit Magnetic Ink Character Recognition (MICR) technology, which involves the addition of a black magnetic strip to the back of a paper check. As X9's chairman, Harold Deal, senior vice-president of BB&T, remarked, this process "is a major step in electrifying the check."

The implementation of X9.37, the Fed spokesman continued, will allow "a single standard MICR data format, [which would] help to reduce the cost and complexity of the nation's paper-based payment system because MICR detail would be transmitted electronically without moving paper checks." In an effort to smooth the transition period to a single-standard format for its customers and vendors, the agency plans to issue a user and implementation guideline as well as host a software vendor's conference later this year.

"The Federal Reserve has been a strong supporter of industry standards and of ASC X9 for many years," Deal said. "In choosing to adopt ANS X9.37, they are reaffirming that commitment and recognizing the outstanding efforts of those who developed the standard."

ANSI president and chief executive officer, Dr. Mark Hurwitz, CAE, pointed out "The adoption of ANS X9.37 with the anticipated benefits of reducing costs and streamlining the Federal Reserve's check processing system, which pays billions of checks annually, displays the strength of the public/private sector partnership. This is yet another example that demonstrates the benefits to industry and consumers of government reliance on the voluntary consensus standards process."


X9 develops and publishes voluntary, consensus technical standards for the financial services industry. X9's inter-industry voting membership includes over 300 organizations representing investment managers, banks, software and equipment manufacturers, printers, credit unions, depositories, government regulators, associations, consultants, and others. The American Bankers Association serves as the administrator for the X9.

 Homeland Defense and Security Standardization Collaborative