Electronic Cheque Payment System

Electronic cheques address the electronic needs of millions of businesses, which today exchange traditional paper cheques with the other vendors, consumers and government. The e-cheque method was deliberately created to work in much the same way as conventional paper cheque. An account holder will issue  an  electronic  document  that  contains  the  name  of  the  financial  institution,  the payer’s  account  number,  the  name  of  payee  and  amount  of  cheque.  Most of the information is in uncoded form. Like  a  paper  cheques  e-cheques  also  bear  the digital equivalent  of  signature:    a  computed  number  that  authenticates  the  cheque  from  the owner of the account. Digital chequing payment system seeks to extend the functionality of  existing  chequing  accounts  for  use  as  online  shopping  payment  tools.  Electronic cheque  system  has  many  advantages:

  1. They  do  not  require  consumers  to  reveal account information to other individuals when setting an auction.
  2. They do not require consumers to continually send sensitive financial information over the web.
  3. They are less  expensive  than  credit  cards  and
  4. They  are  much  faster  than  paper  based traditional  cheque.

But, this system of payment also has several disadvantages.  The disadvantage of electronic cheque system includes their relatively high fixed costs, their limited use only in virtual world and the fact that they can protect the users‟ anonymity. Therefore, it is not very suitable for the retail transactions by consumers, although useful for  the  government  and B2B  operations  because  the  latter  transactions do not  require anonymity,  and  the  amount  of  transactions  is  generally  large  enough  to  cover  fixed processing  cost.  The process of electronic chequing system can be described using  the following steps:

  • Step  1:  a  purchaser  fills  a  purchase  order  form,  attaches  a  payment  advice (electronic cheque), signs it with his private key (using his signature hardware), attaches his public key certificate, encrypts it using his private key and sends it to the vendor.
  • Step  2:  the  vendor  decrypts  the  information  using  his  private  key,  checks  the purchaser’s certificates, signature and cheque, attaches his deposit slip, and endorses the deposit attaching his public key certificates. This is encrypted and sent to his bank.
  • Step  3:  the  vendor’s  bank  checks  the  signatures  and  certificates  and  sends  the cheque for clearance. The banks and clearing houses normally have a private secure data network.
  • Step  4:  when  the  cheque  is  cleared,  the  amount  is  credited  to  the  vendor’s Account and a credit advice are sent to him.
  • Step 5: the purchaser gets a consolidated debit advice periodically.

E-cheque  provide  a  security  rich  Internet  payment  option  for  businesses  and  offer  an easy  entry  into  electronic  commerce  without  a  significant  investment  in  new technologies or legal systems.