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Electronic Check Systems (E-Cheques)

Electronic cheques (E-Checks) are another form of credit payment that lets customers use digital online cheques to pay Web merchants directly. Here customers must register themselves with a third party account server. The merchant is now like the receiver of the paper cheque and need not be an account holder with third party account server. The third party now regulates the flow of funds between its clients. 

In all respects, the electronic cheque (E-Checks) has the same features as a paper cheque. Like the paper cheque, the message is first given to the receiver who, in turn endorses the cheque and presents it to bank to obtain funds. The “NetCheque" is an example of electronic cheque. It was developed by the Information Science Institute and contains all the software for issuance of the Cheque, identification of signature and depositing into the account. Many organizations are using "NetCheque" for internal applications. 

Working of E-Cheques 
For transactions through e-cheques, the seller and the buyer have to get themselves certified by a certifying authority before entering into a business deal. The cycle of e-cheque operation can be explained as follows. 

Step 1) The consumer (or buyer) has to visit the website of seller (or supplier) and has to select the goods to be purchased of his choice.

Step 2) Then the buyer gets invoices, details, and the bill from the seller. 

Step 3) Buyer then sends the cheque to the supplier after filling and signing it. 

Step 4) The seller deposits this cheque with his bank.



Step 5) The seller's bank sends the cheque to buyer's bank to confirm its validity and for updating the record of buyer's account. 

Step 6) After getting validity confirmation, the seller's bank informs the seller about its genuineness. 

Step 7) The seller now supplies the goods and receives acknowledgement from buyer for its receipt. 

Step 8) Buyer requests his bank for clearance of cheque(s) for making payment to seller's bank. The bank debits from the account of buyer and credits the amount (i.e. makes payment) to seller's bank. 

Step 9) Seller's bank informs the seller that payment has been received against e- cheque and his account has been credited.

Advantages of E-Cheques 

1) They work in the same way as traditional Cheques, thus simplifying customer education. 

2) Electronic Cheques are well suited for clearing micro payments; their use of conventional cryptography makes it much faster than systems based on public key cryptography (e-cash). 

3) Electronic Cheques create float and the availability of float is an important requirement for commerce. The third party accounting server can make money by charging the buyer or seller a transaction fee of a flat rate fee, or it can act as a bank and provide deposít accounts and make money on the deposit account pool. 

4) Financial risk is assumed by the accounting server and may result in easier acceptance. 

5) Reliability and scalability are provided by using multiple accounting servers. There can be an inter account server protocol to allow buyer and seller to "belong" to different domains, regions, or countries. 

Disadvantages of E-Cheques

1) The problem come when merchant does not accept cheques. 

2) The other problem could be when one has more than one signer or endorser. 

3) Fraud by unscrupulous merchants is one danger; hacking into the electronic records or interception of a transmission is another. 

4) Due to the insufficient funds in many individual's bank accounts, their e- cheques are often "bounded" or returned. This not only causes delays in the payment transaction, but its increases the amount of time involved in returning and refunding payment transactions. 


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