The Federal Reserve banks plan to replace one of their oldest online-access systems with an Internet version over the next 18 months, an official said Monday.
A pilot group of 25 banks is already using the new service, called FedLine Advantage, said William Barouski, a senior vice president of the Federal Reserve Bank of Chicago who is the FedLine product manager. FedLine Advantage provides Internet access to several important Fed payments systems, including Fedwire and FedACH Services.
Regional Fed banks have contacted 1,500 other banks and begun scheduling them for conversion, Mr. Barouski said. By mid-2006 all 8,500 that use FedLine services will have been converted to Internet-based versions, he said.
The oldest FedLine service, a dial-up service based on Microsoft Corp.'s antiquated MS-DOS operating system and in use since the mid-1980s, will then be retired, he said. The Fed has not been enhancing that service, he said. "You get the improved functionality only through FedLine's Web services."
Since June 2001 the Fed has offered limited access to payment services through an Internet-only program called FedLine Web. But FedLine Web does not provide some important automated clearing house services, wire transfers, or the ability to issue some securities, such as government bonds. The DOS-based service provides all of these, and so does FedLine Advantage.
FedLine Advantage also provides a wider range of connections than FedLine Web, including private-dial and dedicated private leased line, Mr. Barouski said.
It also requires the bank to use virtual private network technology, so many will have to install some new equipment, he said. But it is typically faster to use than either of its predecessors; has a more intuitive user interface, with enhanced help functions; and provides more information reporting, Mr. Barouski said.
Concerns that some banks in remote locations lack Internet access are no longer warranted, Mr. Barouski. Fed customer surveys and a spring survey by the Independent Community Bankers of America demonstrate the point, he said.
Tim Cook, the Washington trade group's director of communications, said that all of the 912 community banks in its survey had Internet access, and that 87% had high-speed connections.
Carl Faulkner, a principal at the bank technology consulting firm Cornerstone Advisors Inc. of Scottsdale, Ariz., said the Fed's move was overdue. Many of the midsize banks he deals with are still using the Fed's MS-DOS service, because it offers functions that FedLine Web lacks, notably access to wire transfers, Mr. Faulkner said.
Many banks maintain a single MS-DOS machine - which must be kept in a secure area, often locked in a bank's wire room - to initiate wires, he said. Even if you used Web "you still had to have your DOS guy."
