Link aims to connect its network to systems in 18,000 Post Office outlets over the next six months. It is currently in discussions with suppliers including ICL and IBM.
Under the planned universal bank service, due to come into force in 2003, Post Office Counters will provide basic banking services for the financially excluded - such as homeless people - in partnership with the banks.
From 2003, social security benefit payments will be paid electronically into bank accounts, in place of the current paper-based system.
Scott Housley, head of banking services at Link Interchange Network, said the network connection to the Post Office was along similar lines to its previous collaborations with high street banks. The network connection will use a dedicated line from British Telecom.
"There will be a fair amount of testing to do but we see this as a very similar connection to taking a new bank on board," said Housley. "The technical issues will be very similar."
Link and the Post Office will exchange messages using the Link Interchange Standard, the cash machine network's message standard. Customers will be issued with a magnetic card that will enable them to receive benefit payments from Post Office branches.
Post offices will use a platform based on the Horizon system, supplied by ICL, which is currently used by Post Office Counters.
Users will swipe their card through card readers in post offices. The payment request will then be sent to the Horizon platform before being passed on to the Link network. From the Link network the request will be routed to the user's bank, which authorises payment.
An ICL spokesman said about 80% of Post Office outlets are already connected to the Horizon system. The roll-out is due to be completed within the next few months.
It is hoped that the Post Office has learnt from its last major IT project, also supplied by ICL, which ended in acrimony.
Pathway was a joint Post Office and Benefits Agency project to computerise the Post Office's network and automate the payment of benefits. However, the initiative was abandoned last year and the Post Office took a £571m charge on the project.