FSTC To Market E-Check Technology

The Financial Services Technology Consortium plans to market and license its patented electronic transaction technology to financial institutions and other industries. Under a multiyear marketing agreement, FSTC will provide marketing support for the patent portfolio, while Telcordia, a Morristown, N.J.-based telecommunications company, will act as worldwide licensing agent for the portfolio.

The technology allows digitally signed payment instructions and other types of documents to be sent electronically via e-mail with increased security and speed. "The key innovation is the use of digitally signed electronic payment instructions and the attached remittance information," said Zack Tumin, executive director of FSTC. "Yet the two can be taken apart and still retain the validity of the digital signature."

The core patent, Electronic Funds Transfer Instruments, covers the use of digital signatures to guarantee the integrity and authenticity of payment instructions sent electronically between parties. Although it can be applied to any electronic financial document, the technique is directly applicable to funds transfer instructions sent between account holders over public networks.

Other patents, Method and System for Processing Electronic Documents, cover a technique that lets sub-documents be detached from a digitally signed package of electronic documents while retaining the original authorizing signature.

The patents resulted from the FSTC's five-year research project on e-checks, which combine digital signature technology and electronic payments. The project, involving banks, technology companies and the U.S. Treasury, culminated in a successful test in which e-checks were used to communicate payment instructions and remittance information between the Treasury, participating banks and defense contractors.

The goal of the project, said Tumin, was "for the industry to make full use of digital signature in order to guarantee the integrity and authenticity of payment instructions.

Phase I of the U.S. Treasury pilot was concluded in 2000, with over $10 million in payments securely disbursed over the Internet. Phase II, which is now operational, opens up trial participation to a broader community of participants.

A start-up company, Clareon, Portland, Me., has licensed the e-check technology and incorporated it into PayMode, its secure electronic payment engine for e-commerce applications. PayMode works seamlessly with any bank and integrates quickly and easily with any ERP system or accounting software. FleetBoston Financial's corporate cash management division is marketing PayMode to its large corporate and mid-market customers nationwide.

In addition to applications in financial services (such as the secure routing of electronic checks and mortgage applications) the technology has wide application in fields such as medicine (electronic medical records and electronic prescriptions) and law (electronic contracts). In Australia, for example, a bank-centered pilot involves the exchange of supply and payment instructions for a dental exchange.

"It goes beyond just electronic payment instructions," said Tumin. "That's why FSTC believes it has application in domains beyond financial services-anything that requires security of electronic transactions and where there's a digital signature and an attachment that comprises the transmission."

Licenses to the patent portfolio are available in the form of either a software developer license or a service provider license. A limited duration, limited scope trial license is also available to service providers wishing to determine the commercial feasibility of the technology prior to taking out a full commercial license.