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Show The widely heralded cashless-checkless banking system whereby funds are deposited or withdrawn by computer terminals is running run-ning into some legal snarls. THE RECENT ruling of a federal district judge that terminals constitute branch banks is slowing the adoption of electronic funds transfer system. A technological revamping of the nation's banking system sys-tem is long overdue. More than 30 billion checks are processed annually, and in five years the number is expected ex-pected to increase to 45 billion plus. ' IF A better system is not perfected and instituted soon, our current method of transferring trans-ferring money could reach the breakdown point. The present controversy revolves around the rights of different banks to compete with each other under a national na-tional electronic financial network. THE STAFF of Babson's-Reports Babson's-Reports believes a workable system, legally and structurally struc-turally feasible, will evolve once the U.S. Courts approve the recommendations of the National Commission on Electronics Funds Transfer, a panel recently appointed by President Ford. (Resort to Congress can be avoided.) A huge market potential should then develop. Unlike savings and loan associations as-sociations and other thrift institutions in-stitutions (which are unaffected unaf-fected by the controversy), commercial banks, i.e. nationally na-tionally chartered banks come under the federal McFadden act, which prohibits them from engaging in branch banking. THESE BANKS are in violation of the Act when they operate remote computer terminals ter-minals to make deposits, withdrawals, loan payments, and transfer of funds between savings and checking accounts. ac-counts. In December of 1974, the U.S. Comptroller of the Currency exempted electronic elec-tronic funds transfer system terminals from the branch banking regulations, only to be overturned in an appeal to a U.S. District Court in August of 1975 by the savings and loan lobbyists. THESE THRIFT institutions institu-tions are already the leaders in installing and promoting electronic funds transfers. Over one-half of the S&Ls have on-line electronic installations in-stallations in banks and in retail re-tail establishments. Although EFTS (electronic funds transfer systems) would result in a considerable reduction in the number and .cost of checks, expanded banking services, and extension exten-sion of services outside present office centers, there are disadvantages in the system. sys-tem. FOR EXAMPLE, there is the possibility of computer fraud or forgery, undetected errors, and invasion of privacy, as well as cancellation cancella-tion of the right to stop payment and decrease of the time it takes for a check to clear (a disadvantage to the checkwriter but not necessarily neces-sarily for the banks). Nevertheless, these problems are minor and should be resolvable so that the nation's banking industry can function more efficiently. . THE FEDERAL Reserve Board is striving to integrate the banks, the various businesses in the country, and their customers within a network, and eventually such a system will be in operation. A $5-billion market has been estimated for the producers of the terminals over the next decade. SUCH principal manufacturers manufac-turers as Addressograph-Multigraph, Addressograph-Multigraph, Burroughs, IBM, NCR, and TRW are already entrenched in the market in addition to the numerous smaller companies. The Research Department of Babson's Reports recommends recom-mends for purchase International Interna-tional Business Machines, which has an all-inclusive position in such information and data-processing sectors as computers, word-processing equipment, photocopying, point-of-sale retail systems,: as well as terminals for electronic elec-tronic funds transfer sys- terns. ; AN acceleration of its earnings earn-ings is anticipated this year. Anyone who would like a free report on this company may write to Babson's Reports Inc., Wellesley Hills, Massachusetts Mas-sachusetts 02181. |