Anatomy Of A Water Project
While paper cheques still outnumber electronic payments by number of transactions, by 1993 the dollar amount of electronic payments in the Group of Ten Countries of the Bank for International Settlements was already nearly five times the amount of payments made by cheque, according to a Furash & Company estimate.
A late 1996 American Banker/Gallup survey that shows more than half of US PC-owners interested in on-line banking is another indicator; and Huntingtons experience with acceptance of telephone and on-line bill for Smart Cards and Internet banking, all suggest that the consumer marketplace is ready to make electronic transactions a standard way to make payments.
Neither have non-bank providers of electronic payment services been idle. During 1995. Microsoft announced its open financial connectivity system. This was seen by many stakeholders as Microsoft bid to control the payments system the same way it has controlled PC operating systems, simply by being first and most accessible. In January 1997, Microsoft and Checkfree/Intuit emerged from months of talks to announce their open financial exchange, or OFX protocol, a convergence of the systems of the two companies to be in usable form by autumn, designed to all users of any home financial software to connect to any bank using the protocol.While many still maintain an independent stance, this event marks what financial historians may well see as a watershed in the development of electronic commerce. From now on, electronic payments will look easy to individual users, and the rate of growth in such payments will accelerate.
While deployment of OFX, with its promise of fast, easy connectivity makes the need for a solution more pressing, because these protocols have been developed by two highly influential non-banking corporations, independently of banks or the banking system, which will ultimately be responsible for the outcome of individual transactions.
Such companies cannot be expected to make the interests of the banking industry, or the brand equity of individual banking companies, a central strategic objective in the design of their protocols. We have no assurance that OFX address the key questions of safety, soundness, and privacy. Who is to ensure that payments requested via electronic channels are authentic, that they will be handled securely, delivered reliably, and protected consistently?
This is a task that can be adequately handled only by banks, the industry group with the greatest interest in the financial security of its customers, the greatest expertise in handling payments, and the most highly trained sensitivity to the legal and regulatory requirements surrounding the movement of money. The work needed to bring our highly competitive industry together has had an auspicious beginning.
The bankers Roundtable, whose member banks employ just over 1 million people and hold some 70 per cent of all US banking assets, formed a Technology Task Force in 1995 to study and make recommendations on these issues.The Task Force, which is consulted regularly by government agencies and committees as part of the process of developing the best possible blend of private initiative and public oversight in this important new arena, has created BITS. The Banking Industry Technology Secretariat, a working organisation empowered to act on behalf of the industry to undertake research, design strategies, protocols, and systems, has a board of directors with representatives from the American Bankers Association, the Independent Bankers Association, chief executives of leading Roundtable banks.BITS has identified three key areas in which to move forward.
Inter-operable specifications and standards for the transition to electronic delivery and payments. It is vital that the banking industry ceases to wait for nonbanks to own this territory, as they are so close to doing. If it simply allows the OFX platform to dominate the landscape of cyberspace, it is inviting non-banking to insert themselves between banks and banking customers on the Internet. As a result, the brand identity of individual banks on the World Wide Web could be seriously devalued, as will our ability to control the cost and the content of Internet transactions.
How will banks be able to maintain consistency throughout all their channels? If we accept that convenience for todays banking customer means access to financial service at any time, through whatever channel - smart card, smart phone, interactive kiosk, telephone or PC, for example, then we must also accept that the customer must be able to access the same services from a bank.
We must build and oversee a standard for the electronic delivery and payments infrastructure. It is necessary that the systems that control the flow of payments between payers and payees - meet the agreed industry-wide specifications and standards. Otherwise individuals and companies who entrust their payments to the system will have no certainty that the server to which they are connected meets the security and reliability requirements they assume are there.
The requirement is clearly the creation of a single designated authority to certify and regularly check on servers from every segment of the industry, including Visa, the Checkfree-Microsoft-Intuit group, Mastercard, Integration and others.
Such a big project requires a system of protections, including encryption, authentication and settlement protocols, that cannot be accomplished otherwise than through a single, central, trusted authority.
Such an authority, most certainly, should be created from within the banking industry, for that entity will be the single central hub for a system that matches individuals and access points, certifies that persons making and receiving payments are who they say they are, and ensures that payments leaving point A will arrive for use at point B at the correct, actual time.
To leave such issues to chance - or to non-banks, which have no experience in protecting their users from financial harm - is to allow a cloud to remain over the entire process of electronic payments, that could at least stunt the growth of such systems, and, in the worst case, create losses for large numbers of participants in the system.BITS, and the Bankers Roundtable, the American Bankers Association, and the Independent Bankers Association, are working hard to create a system that protects electronic payments in the US and keeps control of the system in the hands of banks in this country. It is vital that the world banking community work together, as well, to create inter-operable standards, certify severs, and most of all maintain security, privacy and efficiency as the use of electronic payments helps world commerce, and benefits and protects our customers.
(The Banker )