1. Copyright © 1999, Financial Services Technology Consortium. All rights reserved. FSML and Echeck Milton M. Anderson Financial Services Technology Consortium miltonma@gte.net W3C Signed-XML Workshop April 15-16, 1999

2. Copyright © 1999, Financial Services Technology Consortium. All rights reserved. Check Fundamentals UCC Section 3-104. Form of Negotiable Instruments: “Draft”; “Check”; “Certificate of Deposit”; “Note.” (1) Any writing to be a negotiable instrument within this article must (a) be signed by the maker or drawer; and (b) contain an unconditional promise or order to pay a sum certain in money and no other promise,... (c) be payable on demand or at a definite time; and (d) be payable to order or to bearer.

3. Copyright © 1999, Financial Services Technology Consortium. All rights reserved. Writing and Signing Writing includes electronic recording per Fed Evid R 1001(1) Sign includes any symbol executed or adopted by a party with present intention to authenticate a writing per UCC Section 1-201(39) Black’s Law Dictionary

4. Copyright © 1999, Financial Services Technology Consortium. All rights reserved. Payee Electronic Checkbook Payer Endorsement Check E-Mail Payee’s Bank credit account Accounts Receivable Payer’s Bank debit account Clear and settle echeck Invoice Electronic Checkbook Deposit E-Mail or WWW Signature Certificates Signature Certificates Invoice Check Signature Certificates Accounts Payable Electronic Check Concept Invoice Check Signature Certificates

5. Copyright © 1999, Financial Services Technology Consortium. All rights reserved. PayeePayer Payee’s BankPayer’s Bank Electronic Funds Transfer Deposit Echeck Write Echeck, Sign Electronic Check Cash and Transfer Flow Endorsed Echeck Post EFT Credit Verify Signatures, Debit Echeck, Transfer Deposit as EFT Credit Verify Signatures, Endorse, Write Deposit, Sign

6. Copyright © 1999, Financial Services Technology Consortium. All rights reserved. PayeePayer Payee’s Bank Verify Signatures, Endorse, Write Deposit, Sign Payer’s Bank Clear and Settle Echeck Deposit Echeck Write Echeck, Sign Certified Electronic Check Flow Endorsed Certified Echeck Endorsed Certified Echeck Verify Signatures, Credit Deposit Verify Signatures, Debit Echeck Certified Echeck Certified Echeck Verify Signatures, Certify Echeck

7. Copyright © 1999, Financial Services Technology Consortium. All rights reserved. check payer’s signature action payer’s account payer’s cert attachment invoice payer’s bank’s signature payer’s bank’s cert Check public key references signatures endorsement endorser’s signature action endorser’s account endorser’s cert endorser’s bank’s signature endorser’s bank’s cert Endorsement public key references signatures deposit depositor’s signature action depositor’s account depositor’s cert depositor’s bank’s signature depositor’s bank’s cert Deposit public key references signatures Electronic Check Signatures and Endorsement

8. Copyright © 1999, Financial Services Technology Consortium. All rights reserved. Payer System Check writing Email or web interface Network Accounts payable interface Payee directory Incoming invoice processing Accounts payable User interface processing Electronic checkbook interface User interface Electronic checkbook Check register

9. Copyright © 1999, Financial Services Technology Consortium. All rights reserved. Electronic Checkbook Card Functions check signing, endorsing crypto routines Private signing keys signer public key, signer personal data check writing checkbook adminstration check log/register, certificates, root public keys Connector Key generation checkbook initialization

10. Copyright © 1999, Financial Services Technology Consortium. All rights reserved. Deposit processing Echeck data base Echeck processing Cryptographic verification X.509 certificate and account data base FSML document processing SMTP mail processing Firewall and other security functions Secure mail directory FSML document log Deposits from the Internet Demand deposit account systems On-us echecks Deposits Deposit and check displays Research workstation Interface to clearing and settlement Clearing via X9.46 files to other banks Echeck archiving Server management Statementing Echeck archive Administrative reports Bank of First Deposit Echeck Server Functions

11. Copyright © 1999, Financial Services Technology Consortium. All rights reserved. Conclusion Echeck is in use at the US Treasury Financial Management Services for paying DoD suppliers Echecks are being cleared by Bank Boston, Bank of America, Federal Reserve Bank of Boston $700,000 peak day so far Systems being upgraded from trial to production Wider range of attached documents Other financial instruments FSML 1.50 is done, FSML 2.00 will use XML

12. Copyright © 1999, Financial Services Technology Consortium. All rights reserved. PayeePayer E-Mail Payee’s Bank Verify Signatures, Endorse, Write Deposit, Sign Payer’s Bank Clear and Settle Echeck Deposit E-Mail or WWW Echeck Write Echeck, Sign Electronic Check Basic Flow Endorsed Echeck Endorsed Echeck Verify Signatures, Credit Deposit Verify Signatures, Debit Echeck

13. Copyright © 1999, Financial Services Technology Consortium. All rights reserved. PayeePayer Payee’s Bank Send Invoice Post Payment Payer’s Bank Clear and Settle Echeck Deposit Echeck Write Echeck, Sign Electronic Check Lockbox Flow Endorsed Echeck Endorsed Echeck Verify Signatures, Credit Deposit Verify Signatures, Debit Echeck Invoice Lockbox Invoice Verify Signatures, Endorse, Write Deposit, Sign

14. Copyright © 1999, Financial Services Technology Consortium. All rights reserved. Public Key Signature Security Fundamentals Signer Private signing key Public signature verification key Key pair generation Public key infrastructure Private key possession and control

15. Copyright © 1999, Financial Services Technology Consortium. All rights reserved. Payee System Check and attachment verification Email or web interface Network, to bank Email or web interface Payer directory Advice of payment processing Network, from payer Electronic checkbook interface User interface processing User interface Electronic checkbook Check register Accounts payable Endorsement and deposit processing

16. Copyright © 1999, Financial Services Technology Consortium. All rights reserved. Echeck data base Echeck processing Cryptographic verification X.509 certificate and account data base FSML document processing Interface from clearing and settlement FSML document log Demand deposit account systems Echecks Deposit and check displays Research workstation Interface to clearing and settlement Returns via X9.46 files to other banks Echeck archiving Server management Statementing Echeck archive Administrative reports X9.46 files from other banks Returned echecks Returns Paying Bank Echeck Server Functions

17. Copyright © 1999, Financial Services Technology Consortium. All rights reserved. Customer Card initialization Bank echeck server Marketing and sales Bank account administrative systems Bank Certification Authority 7. X.509 certificates and account blocks 12. CRL 8. PIN mailer 9. Electronic checkbook, smart card reader, software, instructions 4. Electronic checkbook issuance instructions 3. Echeck account information 1. Sales contact 2. Account agreement and customer data 11. Account activation 10. Card sent notification 5. Public key, certificate request, account block request 6. X.509 certificates, account block Echeckbook Distribution & Public Key Infrastructure