What is an eCheck?
eCheck, a new payment instrument combining the security, speed and processing efficiencies of all-electronic transactions with the familiar and well-developed legal infrastructure and business processes associated with paper checks, is the first and only electronic payment mechanism chosen by the United States Treasury to make high-value payments over the public Internet.
The Electronic Check:
- leverages the check payments system, a core competency of the banking industry.
- fits within current business practices, eliminating the need for expensive process re-engineering.
- works like a paper check does but in pure electronic form, with fewer manual steps.
- is designed to meet the needs of businesses and consumers in the 21st century, using state of the art security techniques.
- can be used by all bank customers who have checking accounts, including small and mid-size businesses which currently have little access to electronic payment systems.
- enhances existing bank accounts with new e-commerce features.
Let's examine how eCheck works for the banking industry and the clients it serve. There are fundamental characteristics and differences between paper check, the eCheck and other Electronic Funds Transfer (EFT) transactions. eCheck will be an important payments instrument in transitioning businesses and consumers into the emerging world of electronic commerce.
First, what is the eCheck?
An eCheck is the electronic version or representation of a paper check.
eChecks:
- contain the same information as paper checks contain
- are based on the same rich legal framework as paper checks
- can be linked with unlimited information and exchanged directly between parties
- can be used in any and all remote transactions where paper checks are used today
- enhance the functions and features provided by bank checking accounts
- expand on the usefulness of paper checks by providing value-added information
How do echecks work?
eChecks work the same way a check does.
- the check writer "writes" the eCheck using one of many types of electronic devices and "gives" the eCheck to the payee electronically.
- the payee "deposits" the Electronic Check, receives credit, and the payee's bank "clears" the eCheck to the paying bank.
- the paying bank validates the eCheck and then "charges" the check writer's account for the check.
Why use echecks?
eChecks have important new features. They offer:
- the ability to conduct bank transactions, yet are safe enough to use on the Internet
- unlimited, but controlled, information carrying capability
- reduces fraud losses for all parties
- automatic verification of content and validity
- traditional checking features such as stop payments and easy reconciliation
- enhanced capabilities such as effective dating
The eCheck:
- can be used by all account holders, large and small, even where other electronic payment solutions are too risky, or not appropriate
- is the most secure payment instrument available today
- provides rapid and secure settlement of financial obligations
- can be used with existing checking accounts
- can be initiated from a variety of hardware platforms and software applications
What is eCheck technology?
eCheck technology is software and hardware developed by FSTC members to:
- minimize start up expenses
- apply universal industry standards
- provide ubiquity for participants
eChecks are based on:
- the Financial Services Markup Language (FSML)
- strong digital signatures using any available algorithm
- secure hardware tokens such as smartcards
- digital certificates
- banking and business practices
eChecks are designed to leverage technology capabilities that were not available as recently as three years ago. As technology continues to evolve, the FSTC will capitalize on new developments by integrating significant break-through technologies into the echeck's open architecture.
How secure are echecks?
eChecks are the most secure payments instrument or transaction ever designed or developed. echecks are designed to utilize state of the art security techniques of :
- authentication
- public key cryptography
- digital signatures
- certificate authorities
- duplicate detection
- encryption
eChecks further enhance banking practices with added security so that even breaking the cryptographic protections would not necessarily allow a fraudulent transaction to be paid.
Are echecks really checks?
eChecks provide the best of both paper and electronic laws and regulations to bank customers:
- echecks are based on check law and have the same characteristics of paper checks but in all-electronic form. Account agreements include provisions for eCheck transactions.
- the eCheck also provides consumers the protections and rights from Regulation E, which limits liability and establishes dispute resolution timeframes.
- coupling the eCheck security technology with a sound legal structure reduces the exposure and risk of loss to banks and their clients.
What do echecks provide that will permit banks to sustain their leadership position in the payments system?
eChecks:
- leverage and strengthen the relationship between the account holder and banking institution.
- continue to emphasize the strengths of the check as a payments instrument
- are based on a universal set of technologies to permit rapid and effective deployment
- target virtually all payment system participants - from individual check writers and receivers to large organizations, corporation, and agencies.
Why will echecks lead the way?
eChecks leverage multiple new technologies and will set the stage for other new products and services. At the same time, echecks integrate into today's business practices and coexist with paper check processing.
eChecks are:
- easily understood by bank customers
- easy to use
- extremely safe
- easy to process
Conclusion
eChecks will lead the way to an Electronic Commerce environment for businesses and consumers.
- banks are providing the leadership
- banks are controlling the process
- banks are evolving the payments mechanism
eChecks will succeed because eCheck meets real business needs and is based on the paper check - the most popular non-cash payment choice, and a core competency of banks.
