Companies must avoid cheques to progress

Firms remain reluctant to part with funds over the internet, and fear about security is not the only culprit for delaying the spread of e-payment.

Breaking the almost mystical bond between company accounts departments and their cheque book could be the internet’s biggest challenge.

More and more firms are going online to advertise, find suppliers, share information, recruit staff and place orders. But from that point onwards – willingly or not – most are coming offline to settle the bill via EDI-based fund transfer systems or the cheque – a form of payment Charles Dickens would have been at home with.

There seem to be two factors at work. One is trepidation at the thought of paying for a £500,000 piece of capital equipment via the internet. The other involves a familiar blame figure – the great British banker.

Given the internet’s less than glowing reputation as a secure medium, it is not surprising companies are nervous about using it as a platform for electronic payment.

Governments and the internet industry are attempting to address these concerns, albeit with mixed success. Much of the focus has been on developing public key infrastructure (PKI) technology that will allow universal, trusted interaction between businesses.

The aim is to reassure people that data is going to the right person, but the barrier to widespread PKI-based security systems is – as is so often the case in the IT world – down to compatibility.

The large number of global standards, technologies and regulations underpinning PKI has raised the spectre of companies using different systems and so being unable to communicate with each other.

At its recent annual conference, EEMA, the European e-business forum, identified key infrastructure as an important issue and set up a working group to try to resolve the problems surrounding it.

In the meantime, there are plenty of ways to make payment over the internet a secure process, including digital certificates, advanced encryption and password protection.

And the internet is not the only source of concern. BACS, the UK’s biggest automated clearing house, which handles billions of pounds worth of transfers a year via its EDI-style network, has been in the spotlight over the robustness of its security systems.

Phil Taylor, market development director at IT company Logica, says fears over internet security can be exaggerated.

‘Lots of companies already use corporate electronic banking systems, and instruct the movement of large amounts of money, over the public telephone network,’ says Taylor. ‘The technology to create secure and trusted payment environments on the internet exists.’

But the protocols for shifting money from one place to another are entirely at the whim of the bankers. And when it comes to enabling easy payment via an open medium such as the internet, this is proving an obstacle.

Taylor believes the heart of the problem is banks’ desire to stick with the vast networks they and other financial institutions have built up over the years.’Banks are happy to operate electronically within their existing channels,’ he says.

‘Outside those, things become more difficult. A number of digital exchanges have asked us to connect them to the banking networks. We have to tell them that even though we can provide the software, you can’t become a member of those networks.’

Taylor says demands will grow for convenient online payment services. Financial commentators have warned banks that if they fail to seize the initiative, they will lose out to others developing internet-based payment services as corporate users cotton onto the considerable benefits available.

An electronic transaction is estimated to be 20 times cheaper than a paper-based one. And unlike banks’ existing batch-processing systems, the web offers the opportunity for real-time visibility of payment and account information.

Robin Arnfield, a specialist in e-payment and author of several reports on the subject for financial intelligence group Lafferty, says institutions need to work with their business customers to take e-payment deep into their enterprises.

‘That is not really happening,’ says Arnfield. ‘Business needs to be shown that there is a quantum leap available, but many are not yet convinced. Some of the blame for that has to lie with the banks.’