The new services grew out of a long-running Fed effort to upgrade its systems, with initial results in 2004 when it replaced its 20-year-old DOS operations, says William Barouski, the Fed svp who's FedLine’s product manager.

“A number of our network connections were beyond their useful life, and we realized that IP (Internet protocol) was the way to go,” he says. “Many of our network options weren’t just outdated, but in many cases, they weren’t able to provide the services that many of our customers expect today.”

Unsurprisingly, Barouski has high hopes for FedLine Direct. “It will allow for greater flexibility and interoperability that will let Fed customers jettison outdated equipment, integrate the Fed’s connections into their back-end operations, and, because they’re using common protocols, makes engineering these connections much simpler,” he says.

The real benefits, though, are more strategic: Encouraging automated payments operations promotes the Fed’s larger aims of taking the U.S. payments system more fully into electronic venues, minimizing paper in all its forms, and, by extension, greasing the wheels of business.

“Having any reliable network facilitates electronic payments, and if you facilitate electronic payments, you facilitate commerce,” says Barouski. Greater global business in turn will be fostered, “because the protocols become ubiquitous—IP spans the globe.”

Originally, the Fed wanted to use Internet protocols over closed networks—open protocols but over closed networks—but abandoned the idea in favor of the public switching network, says Barouski, because the market had moved in that direction, and full interoperability was what his team wanted to create in the first place. “It was a lot easier when customers confirmed our direction,” he says.

Full details are available at www.frbservices.org. (Contact: Federal Reserve Financial Services Policy Committee, 612-204-5274)