Revolutionary developments in marketing, information and communications technology continue to transform the banking and financial industry. Distribution of banking services through the Internet is an important part of this transformation. The objectives of this thesis are mainly to assess the potential functions of e-clearing with respect to error free fast funds settlement and to evaluate the competitive advantages of Electronic Clearing House over Automated Clearing House. The study explores the Electronic Clearing House in the perspective of time savings, various costs elimination and maximization of profit for all the stakeholders. The security measures in terms of digital signature to secure data and information exchange over the internet would also be examined.