US Internet banking specs released for public review

A not-for-profit research organisation has published for public comment a new specification for sending payment instructions to banks over the Internet in a secure way. The Financial Services Technology Consortium (FSTC), which includes a number of U.S. financial institutions and some IT vendors, said its Bank Internet Payment System (BIPS) specification is available for public review and comment on the Internet.

A not-for-profit research organisation has published for public comment a new specification for sending payment instructions to banks over the Internet in a secure way.

The Financial Services Technology Consortium (FSTC), which includes a number of U.S. financial institutions and some IT vendors, said its Bank Internet Payment System (BIPS) specification is available for public review and comment on the Internet at http://www.fstc.org/projects/bips.

The BIPS specification describes a proprietary protocol for sending payment instructions to banks safely over the Internet and details the server architecture for processing payment instructions.

With the specification the banking industry is trying to extend to the Internet its traditional role of being a "trusted agent" for processing financial transactions. The banking industry is doing this by using existing bank payment systems as much as possible.

"A BIPS implementation would provide a number of benefits for customers of banks, including less costly transactions, more convenient banking services with greater control, and increased flexibility of payment options," the FSTC said in an executive summary of the specifications on its Web site. "Benefits of a BIPS implementation for the Financial Industry could include new revenue opportunities, the ability to reach customers globally rather than just locally, and new possibilities for reducing payments infrastructure costs."

In other words, the US banking industry wants to play a part in the emerging market for online financial transactions by establishing an infrastructure that combines existing payment systems with emerging and potentially cheaper Internet technologies.

Executives at FSTC were not immediately available for further comment.

Among the participants in the FSTC's BIPS project are Citibank Corp., Concept Five Technologies Inc., Fujitsu Research Institute, Glenview State Bank, GlobeSet Inc., Mellon Bank Corp., NCR Corp. and Tandem Computers Inc. Project advisors include @Work Technologies, CommerceNet, The Federal Reserve Bank of Boston, The National Automated Clearing House Association (NACHA) Internet Council, the Open Group and the Society for Worldwide Interbank Financial Telecommunications (SWIFT).

BIPS is designed for a variety of financial transactions between business and banks ranging from low amount retail purchases to high volume trade exchanges, but only the aggregates of micropayments, the groups said.

The new Internet-based payment methodology promises to let bank customers agree on the terms of a payment, access multiple bank payments systems online -- "with one protocol and one interface, without requiring existing systems to be changed dramatically" -- to choose the most cost-effective way to make a payment, and pay a bill online.

In addition, BIPS can aid users with the selection of the appropriate payment mechanism based on requirements such as cost and speed of settlement, the FSTC said. The technology also provides for on-line authentication of payors and payees and authorization for the transaction through the use of digital signatures and digital certificates. The group did not specify which methods it intends to use.

However, BIPS instruction messages and their responses conform to the Extensible Markup Language (XML), the next freely available XML parser, the FSTC said.

Under the guidelines offered by the FSTC today, client software, or Java applets, will be able to capture payment terms selected by end-users, format those requirements into BIPS payment instructions which are then sent to over the Internet using existing e-mail software or Web browsers. Received by a bank the BIPS payment instructions are verified, interpreted and translated and routed by a BIPS Server to the appropriate bank payments system.

A BIPS platform, now being tested by several banks including Glenview State Bank and Mellon Bank, can be built "with many off-the-shelf components," the FSTC said.

Further information on the FSTC, its members, BIPS and the project participants can be found at the FSTC's Web site at http://www.fstc.org.

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