A group of US banks, IT vendors, and the US Department of Treasury have started a pilot test of a business-to-business payment system, using an electronic check.
The first use of an electronic cheque -- or echeque, designed to replace paper cheques and be sent via email -- was a payment made by the Treasury's Financial Management Service to GTE Internetworking as part of a government contract.
Details about other trials of echeques outside of the US were not available from participants in a conference call about the pilot , beyond brief mention of an upcoming trial of the echeque system in Asia. They also said Singapore is planning to evaluate how to do a pilot project using the technology.
A key benefit of echeques is that they use the existing banking and business infrastructure and payment practices, said Frank Jaffe, vice president of the Financial Services Technology Consortium (FSTC), a non-profit group whose stated goal is to enhance the competitiveness of the US financial services industry. Furthermore, the control of the transaction remains in the hands of the payer and payee, rather than necessitating the involvement of a third party.
The year-long trial of the echeque system is expected to involve about 50 government contractors, and be rolled out for full production use by 2000, according to a statement released by the parties involved. Payments will be made from two US Department of Defense financial centers.
Echeques are signed by the payer using a digital signature, applied using a combination of smartcards and digital public key certificates.
In the current pilot, involving government contractors, recipients of the e-mailed payment can view the echeque and an attached Advice of Payment document. After verifying the Treasury's digital signature, the contractors will endorse the echeque for deposit and email it to their bank, according to the FSTC statement. The bank will receive the deposit, verify both parties' signatures and enter the echeque into the existing clearing and settlement system. The FSTC estimated that the process will take about two days to complete, compared to about a week for manual paper processes, and claimed that the technology could reduce processing time to a matter of hours.
Besides BankBoston and NationsBank, which are providing electronic chequeing services to their customers using existing accounts, companies involved in the pilot include the following:
-- IBM is providing the echeque server systems used to process deposited echeques, and its researchers led development of the Financial Services Markup Language (FSML) and the Signed Document Markup Language (SDML) used in the echeque infrastructure.
-- Sun Microsystems is providing the echeque server at the Federal Reserve Bank of Boston used to verify the authenticity of echeque payments, clearing the Treasury echeques, and settling the accounts between the commercial banks and the Treasury.
-- IntraNet is providing software to BankBoston and NationsBank to map echeques into a standard banking electronic cash letter format.
-- GTE Internetworking is providing the Public Key Infrastructure used to issue all digital
signature certificates in the trial, and has also provided the signing devices used by the payer.
-- Information Resource Engineering developed the smartcards used in endorsing echeques and signing payment files, and provided its SafeNet network encryption devices used in communications between pilot participants.
-- RDM developed the payer software for the Treasury, also developed the software used by bank customers to receive, process, and deposit echeques.
-- Certicom developed software used to encrypt email messages carrying echeques.
One analyst noted that the echeque scheme appears to buck the trend towards business-to-business payments using P-cards, or procurement cards. This credit-card like system is still a "nascent phenomenon," said Vernon Keenan, senior analyst at Zona Research. "If echeque is properly marketed, it has a chance."
The FSTC's echeque Web site at can be found at http://www.echeque.org/