Electronic Recording Machine, Accounting
Encyclopedia
ERMA, was a pioneering computer
development project run at SRI
under contract to Bank of America
in order to automate banking bookkeeping
. The project, under the technical leadership of computer scientist Jerre Noe
, ran from 1950 to 1955 and was considered a success by all involved, at which point General Electric
was contracted to build 32 ERMA machines. They were so successful in operation that Bank of America was propelled ahead of other banks in profitability, and became the world's largest bank by 1970.
In 1950 Bank of America (NYSE:BOC) was the largest bank in California
, and led the world in the use of check
s. This presented a serious problem due to the workload processing them. An experienced bookkeeper could post 245 accounts in an hour, about 2,000 in an 8-hour workday and approximately 10,000 per week. Bank of America's checking accounts were growing at a rate of 23,000 per month and banks were being forced to close their doors by 2:00PM to finish daily postings.
S. Clark Beise was a senior vice president at BoA who was introduced to Thomas H. Morrin, SRI's Director of Engineering. They formed an alliance under which SRI would essentially act as BoA's R&D arm. In July 1950 they contracted SRI for an initially feasibility study for automating
their bookkeeping and check handling.
SRI immediately found a problem. Because accounts were kept alphabetically, adding a new account required a reshuffling of the account listings. SRI instead suggested using account numbers, simply adding new ones to the end of the list. In addition these numbers would be pre-printed on checks, thereby dramatically reducing the time to match the checks with account information (known as "proofing"). Numbered accounts are now a feature of almost all banks.
With that problem out of the way, SRI returned a report in September 1950 that stated a computer-based system was certainly feasible, which they called ERM, the Electronic Recording Machine. BoA then offered a second six-month contract in November to fully study the changes needed to banking procedures, and design the logical layout of production ERM machines. While this was underway BoA went to a number of industrial companies to set up production of the machines, but none were interested. So SRI was given another contract in January 1952 to build a prototype machine.
One of the biggest problems found in the second phase was how to input the check information, especially the account numbers, with any sort of speed. Beise demanded a system that would not require the information to be changed from one medium to another, from check to punched card
for instance, while at the same time lowering error rates.
SRI investigated several solutions to the problem, including the first OCR
system from a company in Arlington, Virginia. However they found that it was all too easy for banks, and customers, to write over the account numbers and spoil the system. They also experimented with barcode
information, and while this worked well even when printed over, if there was enough "damage" to the code a human operator could not read them in order to input them manually.
Instead they decided to combine the two technologies, and used MICR-printed account numbers which could be read by a magnetic reader similar to those in a cassette tape recorder. The resulting reader was a mechanical tour-de-force, combining five MICR readers with a large rotating drum that forced checks dumped in the top to come out the bottom single-file. The system was eventually able to read ten checks a second, with errors on the order of 1 per 100,000 checks.
The final ERM computer contained more than a million feet (304,800 metres) of wiring, 8,000 vacuum tube
s, 34,000 diode
s, 5 input consoles with MICR readers, 2 magnetic memory drums
, the check sorter, a high-speed printer, a power control panel, a maintenance board, 24 racks holding 1,500 electrical packages and 500 relay packages, and 12 magnetic tape
drives for 2,400-foot (731-metre) tape reels. ERM weighed about 25 tons (22.7 tonnes), used more than 80 kW of power and required cooling by an air conditioning system.
By 1955 the system was still in development, but the BoA was becoming anxious to announce the project. At the time computers, still known as "electronic brains", were all the rage, and if BoA could announce they were using them it would infer a feeling of futuristic infallibility. In September they froze the design.
By this point no less than 24 companies had expressed interest in building the production machines, but eventually General Electric won the competition. Among GE's team members was AI pioneer Joseph Weizenbaum
. The company took the basic design, but decided it was time to move the tube-based system to a transistor
-based one using core memory. This won SRI yet another contract, this time by GE to study the commercial computer market and suggest ways the ERM machines could be sold into other markets. After the construction run they also contracted them to dispose of the original machine.
The first production ERMA system, known as the GE-100, was installed in 1959. Over the next two years the rest of the 32 systems were installed, and by 1966 twelve regional ERMA centers served all but 21 of BoA's 900 branches. The centers then handled more than 750 million checks a year, about the number they had predicted to occur by 1970. The automation was so effective that it allowed BoA to be the first bank to offer credit card
s attached to a user's bank account. ERMA machines were replaced with newer equipment in the early 1970s.
Currently a special room commemorating ERMA machines which is located on Bank Of America facilities in Concord, California
. Address: 1755 Grant Street, Concord, CA 94520-2455, Building C, is being moved across the street to 2000 Clayton Road, Concord CA, Building D Main Lobby.
Computer
A computer is a programmable machine designed to sequentially and automatically carry out a sequence of arithmetic or logical operations. The particular sequence of operations can be changed readily, allowing the computer to solve more than one kind of problem...
development project run at SRI
SRI International
SRI International , founded as Stanford Research Institute, is one of the world's largest contract research institutes. Based in Menlo Park, California, the trustees of Stanford University established it in 1946 as a center of innovation to support economic development in the region. It was later...
under contract to Bank of America
Bank of America
Bank of America Corporation, an American multinational banking and financial services corporation, is the second largest bank holding company in the United States by assets, and the fourth largest bank in the U.S. by market capitalization. The bank is headquartered in Charlotte, North Carolina...
in order to automate banking bookkeeping
Bookkeeping
Bookkeeping is the recording of financial transactions. Transactions include sales, purchases, income, receipts and payments by an individual or organization. Bookkeeping is usually performed by a bookkeeper. Bookkeeping should not be confused with accounting. The accounting process is usually...
. The project, under the technical leadership of computer scientist Jerre Noe
Jerre Noe
Jerre Noe was an American computer scientist. In the 1950s, he led the technical team for the ERMA project, the Bank of America's first venture into computerized banking...
, ran from 1950 to 1955 and was considered a success by all involved, at which point General Electric
General Electric
General Electric Company , or GE, is an American multinational conglomerate corporation incorporated in Schenectady, New York and headquartered in Fairfield, Connecticut, United States...
was contracted to build 32 ERMA machines. They were so successful in operation that Bank of America was propelled ahead of other banks in profitability, and became the world's largest bank by 1970.
In 1950 Bank of America (NYSE:BOC) was the largest bank in California
California
California is a state located on the West Coast of the United States. It is by far the most populous U.S. state, and the third-largest by land area...
, and led the world in the use of check
Cheque
A cheque is a document/instrument See the negotiable cow—itself a fictional story—for discussions of cheques written on unusual surfaces. that orders a payment of money from a bank account...
s. This presented a serious problem due to the workload processing them. An experienced bookkeeper could post 245 accounts in an hour, about 2,000 in an 8-hour workday and approximately 10,000 per week. Bank of America's checking accounts were growing at a rate of 23,000 per month and banks were being forced to close their doors by 2:00PM to finish daily postings.
S. Clark Beise was a senior vice president at BoA who was introduced to Thomas H. Morrin, SRI's Director of Engineering. They formed an alliance under which SRI would essentially act as BoA's R&D arm. In July 1950 they contracted SRI for an initially feasibility study for automating
Automation
Automation is the use of control systems and information technologies to reduce the need for human work in the production of goods and services. In the scope of industrialization, automation is a step beyond mechanization...
their bookkeeping and check handling.
SRI immediately found a problem. Because accounts were kept alphabetically, adding a new account required a reshuffling of the account listings. SRI instead suggested using account numbers, simply adding new ones to the end of the list. In addition these numbers would be pre-printed on checks, thereby dramatically reducing the time to match the checks with account information (known as "proofing"). Numbered accounts are now a feature of almost all banks.
With that problem out of the way, SRI returned a report in September 1950 that stated a computer-based system was certainly feasible, which they called ERM, the Electronic Recording Machine. BoA then offered a second six-month contract in November to fully study the changes needed to banking procedures, and design the logical layout of production ERM machines. While this was underway BoA went to a number of industrial companies to set up production of the machines, but none were interested. So SRI was given another contract in January 1952 to build a prototype machine.
One of the biggest problems found in the second phase was how to input the check information, especially the account numbers, with any sort of speed. Beise demanded a system that would not require the information to be changed from one medium to another, from check to punched card
Punched card
A punched card, punch card, IBM card, or Hollerith card is a piece of stiff paper that contains digital information represented by the presence or absence of holes in predefined positions...
for instance, while at the same time lowering error rates.
SRI investigated several solutions to the problem, including the first OCR
Optical character recognition
Optical character recognition, usually abbreviated to OCR, is the mechanical or electronic translation of scanned images of handwritten, typewritten or printed text into machine-encoded text. It is widely used to convert books and documents into electronic files, to computerize a record-keeping...
system from a company in Arlington, Virginia. However they found that it was all too easy for banks, and customers, to write over the account numbers and spoil the system. They also experimented with barcode
Barcode
A barcode is an optical machine-readable representation of data, which shows data about the object to which it attaches. Originally barcodes represented data by varying the widths and spacings of parallel lines, and may be referred to as linear or 1 dimensional . Later they evolved into rectangles,...
information, and while this worked well even when printed over, if there was enough "damage" to the code a human operator could not read them in order to input them manually.
Instead they decided to combine the two technologies, and used MICR-printed account numbers which could be read by a magnetic reader similar to those in a cassette tape recorder. The resulting reader was a mechanical tour-de-force, combining five MICR readers with a large rotating drum that forced checks dumped in the top to come out the bottom single-file. The system was eventually able to read ten checks a second, with errors on the order of 1 per 100,000 checks.
The final ERM computer contained more than a million feet (304,800 metres) of wiring, 8,000 vacuum tube
Vacuum tube
In electronics, a vacuum tube, electron tube , or thermionic valve , reduced to simply "tube" or "valve" in everyday parlance, is a device that relies on the flow of electric current through a vacuum...
s, 34,000 diode
Diode
In electronics, a diode is a type of two-terminal electronic component with a nonlinear current–voltage characteristic. A semiconductor diode, the most common type today, is a crystalline piece of semiconductor material connected to two electrical terminals...
s, 5 input consoles with MICR readers, 2 magnetic memory drums
Drum memory
Drum memory is a magnetic data storage device and was an early form of computer memory widely used in the 1950s and into the 1960s, invented by Gustav Tauschek in 1932 in Austria....
, the check sorter, a high-speed printer, a power control panel, a maintenance board, 24 racks holding 1,500 electrical packages and 500 relay packages, and 12 magnetic tape
Magnetic tape
Magnetic tape is a medium for magnetic recording, made of a thin magnetizable coating on a long, narrow strip of plastic. It was developed in Germany, based on magnetic wire recording. Devices that record and play back audio and video using magnetic tape are tape recorders and video tape recorders...
drives for 2,400-foot (731-metre) tape reels. ERM weighed about 25 tons (22.7 tonnes), used more than 80 kW of power and required cooling by an air conditioning system.
By 1955 the system was still in development, but the BoA was becoming anxious to announce the project. At the time computers, still known as "electronic brains", were all the rage, and if BoA could announce they were using them it would infer a feeling of futuristic infallibility. In September they froze the design.
By this point no less than 24 companies had expressed interest in building the production machines, but eventually General Electric won the competition. Among GE's team members was AI pioneer Joseph Weizenbaum
Joseph Weizenbaum
Joseph Weizenbaum was a German-American author and professor emeritus of computer science at MIT.-Life and career:...
. The company took the basic design, but decided it was time to move the tube-based system to a transistor
Transistor
A transistor is a semiconductor device used to amplify and switch electronic signals and power. It is composed of a semiconductor material with at least three terminals for connection to an external circuit. A voltage or current applied to one pair of the transistor's terminals changes the current...
-based one using core memory. This won SRI yet another contract, this time by GE to study the commercial computer market and suggest ways the ERM machines could be sold into other markets. After the construction run they also contracted them to dispose of the original machine.
The first production ERMA system, known as the GE-100, was installed in 1959. Over the next two years the rest of the 32 systems were installed, and by 1966 twelve regional ERMA centers served all but 21 of BoA's 900 branches. The centers then handled more than 750 million checks a year, about the number they had predicted to occur by 1970. The automation was so effective that it allowed BoA to be the first bank to offer credit card
Credit card
A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services...
s attached to a user's bank account. ERMA machines were replaced with newer equipment in the early 1970s.
Currently a special room commemorating ERMA machines which is located on Bank Of America facilities in Concord, California
Concord, California
Concord is the largest city in Contra Costa County, California, USA. At the 2010 census, the city had a population of 122,067. Originally founded in 1869 as the community of Todos Santos by Salvio Pacheco, the name was changed to Concord within months...
. Address: 1755 Grant Street, Concord, CA 94520-2455, Building C, is being moved across the street to 2000 Clayton Road, Concord CA, Building D Main Lobby.