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E*Trade accepts e-checks

Online brokerage E*Trade now lets investors transfer cash into their brokerage accounts from their checking accounts over the Internet.

    Online brokerage E*Trade (EGRP) now lets investors transfer cash into their brokerage accounts from their checking accounts over the Internet.

    To date, E*Trade investors have had to send a paper check or use a wire transfer to tap their accounts to cover trades, margin calls, or future investments.

    "This starts to make the Internet a more complete electronic loop. It eliminates the extra step and makes the Net much more convenient," said Forrester Research analyst Cliff Condon.

    E*Trade's new service, which will be free to customers, spotlights an emerging area of financial transactions over the Internet.

    Internet-based bill-paying is emerging as a significant new application. CheckFree has let consumers pay bills online for several years, mostly working through banks, but a majority of payments are made using paper checks.

    CyberCash's electronic check system, called PayNow, has been in pilot testing since January but has only one live customer, East Coast gas utility NUI.

    For its service, E*Trade tapped National Processing Company's (NAP) VirtualPay system, which uses the automated clearinghouse system to transfer funds from a checking account into E*Trade. The ACH system is also used for automatic deposit of paychecks or scheduled payments of mortgages or utility bills.

    NPC created VirtualPay as a fund transfer system developed for consumers to use personal checking accounts securely on the Internet.

    Consumers can pay their monthly charges to Mobil, Unocal, and the Calistoga water company directly from NPC the VirtualPay or the biller's Web site.

    NPC, which handles 400 million financial transactions a year in its mainstream payment processing business and had $373 million in 1996 revenues, is aggressively moving in other areas of Internet-based payment services too.

    David Zook, executive vice president, said NCP is now testing a bill presentment service called VirtualBill, which makes a customer's bills available over the Internet.

    Bill presentment is a new market. CheckFree has only been running transactions live since March. Other players include CyberCash and a new joint venture of Microsoft and First Data Corporation called MSFDC.