Do any of you allow your online customers the ability to originate transactions to other banks, like to make loan payments, made withdrawals etc.? Is so, how does the other bank (bank x) know that my customer has the authority to debit that account? example: my customer debits account at Bank x to make deposit to his acct at my bank.

We are looking into this functionality, but it is probably a ways in the future due to the immense issues with security and privacy. This funtionality will be available much sooner via ATMs. The STAR network is already coming out with such a service that will allow this type of transaction between accounts assuming they are all within the STAR Network.

If you are using ACH for this, Bank X does not have to have evidence of authority. You the OFI does for debits. There is no authority required for credits. Also, the account holder that is being debited has six months to refuse the debit if it is not authorized. We require any customer that is originating ACH, especially debits to have a line of credit equal to one half of the total dollars they intend to debit as a precaution so if the debit is not authorized, we have a source to debit so the account does not go into overdraft with returns. We will hit the line of credit.
Individuals that need to do a loan payment, our core system allows us to set them up and the ACH will automatically send with the settlement date processing for ACH.

I would not allow transfers to other banks directly through an Internet Banking Product. The transfers would more than like be in the form of ACH origination and that is a separate product. Also, the bill payment product is used for this purpose, correct? So I don't see any reason to create a transfer out capability within Internet Banking.

We have been offered this option too. I'm not sure I understand all the implications. Can anyone offer any advice or tell me how this works? I don't know of any banks in our area offering this.