Lecture25_Electronic Checks

ELECTRONIC CHECKS

Well where we talk about on-line
financial payment system then we also think about digital checks or
cheques, because it is also a part of payment system, and a question
arises in our minds that is it possible on Internet that we make our
payments by checks? Like we do in our real life by paper cheques. And
answer is YES. And it is very easy way to make payments by digital
checks. Let me explain this concept briefly that how we can do this or
how we can adopt this method but before explaining its process I want
to explain that what is Electronic Checks or E-checks or you may use
this term as digital checks .
Electronic checks(or cheques) means
that instead of a paper check the customer fills out his/her banking
information (bank account number, routing number) on-line. In other
words an e-check is an electronic version of a paper check. You may use
it in any transaction where earlier you used paper checks. This is the
faster speed process than paper checks.
Well now we are familiar
with this concept. And we say OK. We are ready to adopt this new
system. But we also want to know that hows it works. OK now we talk
about the processing of e-checks, in this way, we try to understand how
an electronic check works.

So how electronic checks work
Electronic
checks are designed to accommodate the many individuals and entities
that might prefer to pay on credit or through some mechanism other than
cash electronic checks are modeled on paper checks, except that they
are initiated electronically, use digital signatures for signing and
endorsing(Means put one's signatures with the check), and require the
use of digital certificates to authenticate the payer, the payer’s bank
and bank account. The payer writes the e-check through a computer, uses
a digital signature and sends it on Internet. The payee receives it,
verifies signatures, endorses it, writes a deposit slip, and signs it.
The endorsed check is then sent over internet to the payee's bank for
deposit. Bank personnel verify signatures, credit the deposit, and then
clear and settle the endorsed e-check by sending it on to the payer's
bank, where signatures are once again verified and the amount of the
e-check is debited from the payer's account. The cryptographic
certificates used with an e-check enable a check payee to determine the
validity of the signatures. Initially, these certificates are actually
transmitted with the e-check, but alternative models where the
transmission, or possibly even issuance, of the certificate is not
required are currently in the making. e-check technology also allows
digital signatures to be applied to document blocks, rather than to the
entire document. This allows parts of a document to be separated from
the original, without compromising the integrity of the digital
signature.
Benefits of Electronic Checks

• Electronic checks work in the same way as traditional checks, thus simplifying customer education.
  
• Electronic
  checks are well suited for clearing micro payments; the conventional
  cryptography of electronic checks makes them easier to process than
  systems based on public-key cryptography.
  

• Electronic
  checks can serve corporate markets. Firms can use electronic checks to
  complete payments over the networks in a more cost-effective manner
  than present alternatives.
  

• Electronic checks create
  float and the availability of float is an important requirement for
  commerce. The third-party accounting server can earn revenue by
  charging the buyer or seller a transaction fee or a flat rate fee or it
  can act as a bank and provide deposit accounts and make money from the
  deposit account pool.
  

• Electronic check technology
  links public networks to the financial payments and bank clearing
  networks, leveraging the access of public networks with the existing
  financial payments infrastructure.