Move over Visa and American Express. Electronic checks (e-checks) are gaining in popularity -- and respect -- by offering commercial and retail Web site operators added flexibility in online payment acceptance.
These days, even Uncle Sam is banking on e-checks. In June 1998, GTE Internetworking received the first-ever US Treasury issued e-check for IT services GTE performed for the US Air Force Material Command. Experts from the Financial Services Technology Consortium (FSTC) have spent over three years and $10 million developing the system to enable e-checking payment. FSTC, formed in 1993, performs cooperative research and development to benefit the financial services industry. E-checking is designed for flexibility, robust security, and platform independence to assure rapid adoption in business-to-business transactions.
Proven Trust
With the $32,000 payment to GTE, BankBoston Corporation, NationsBank Corporation, IBM, and GTE broke new ground, proving that the model of trust they''ve built indeed works as designed. Through initiatives like the one set forth by the FSTC, banks are keeping pace with rival payment systems such as those offered by Microsoft, First Data Corp., Check-Free, and Intuit. "E-check is the banking industry''s attempt to retain control of the payment system and new revenue streams," claims Avivah Litan of the Gartner Group. "E-checks provide customers with a familiar means of banking because they are very similar to the paper checks businesses are issuing today. Customers receive the benefits of electronic commerce with the comfort of knowing that the e-checks they''re issuing are built on existing infrastructures and practices," stated FSTC Vice-president Ed Jaffe.
Signing E-checks
The FSTC system uses digital certificates for issuers to sign checks and to secure the data between payers, payees, and banks. E-check requires its users to possess a SmartCard electronic checkbook that signs checks intended for others and endorses checks that are received prior to deposit into the recipient''s account. Secure/Multipurpose Internet Mail Extensions (S/MIME) is used to assure that no tampering of the check occurs while en route between issuer and recipient. When a check is received via e-mail, the receiver uses cryptography to test the data''s integrity before they endorse it (with the digital keys on the SmartCard) and deposit it in their bank. Companies wanting to use e-checks need an Internet E-mail connection, a SmartCard and SmartCard reader (about $50), and the requisite software that interfaces into back-office accounting systems.
The US Treasury''s involvement in e-checking bodes well for the rest of the on-line world since the US Government tends to be most conservative when it comes to security requirements and issues. With the Treasury''s Financial Management Service''s (FMS) endorsement of real-world e-checks, we''re also seeing rapid adoption in other sectors.
The Pacific Rim Loves E-checks Too!
This fall, the banks that compose Singapore''s national online debit program, the Network for Electronic Transfers Pte Limited (NETS) will begin offering their customers an Internet-based electronic check writing option. "Through e-check we hope to move gradually away from paper checks by introducing a convenient and interoperable online payment service that has the potential for cross-border transactions using digital certificates and open standards," claims Wee Tew Lim, CEO of NETS, and reported by Bank Technology News in their September issue. E-checks will be available to both consumer and business bank customers. Currently, Singapore banks clear more than 8 million checks per year.
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