Q

What are e-checks?

What are e-cheques? How do you describe that payment system? What are the benefits and weaknesses for business and customers? What are some appropriate uses e-cheques?

E-cheques are a mode of electronic payments. This technology was developed couple of years ago by a consortium of Silicon valley IT researchers and merchant bankers and since then has been promoted by many of the financial bodies.

E-cheques work the same way as paper cheques and are a legally binding promise to pay. The payment system uses digitally signed XML documents that provide mechanism to authenticate parties to a transaction. E-cheques are defined using FSML (financial services markup langauge) which allows for addition and deletion of document blocks, signing, co-signing, endorsing, etc. Signatures are accompanied by bank-issued certificates which tie the signer's key to a bank account. Different accounts are used for e-cheques to protect standard chequing account against fraud. Settlement is handled via existing standards - ANSI X9.46 with FSML representation instead of cheque image and ANSI X9.37 cash letter contained in X9.46 encapsulation.

Regarding the benefits of using e-cheques,it seems that consumers would gain from having e-cheques available to make payments for online purchases. The online merchants on the other hand could receive payments instantly and since the customer?s bank will be involved in the transaction, it would be impossible for an e-cheque to bounce. Also, banks can do paperless, efficient transactions. The problems come when your merchant does not accept e-cheques. The other problem could be when you have more than one signer or endorser.

Hope this helps .
This was first published in September 2002

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