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According to Chaum et al. (1990), Electronic Check (eCheck) was first proposed by Chaum in 1988 and has been highly utilized as an online payment method as of 2016. The first eCheck was paid to US Department of Defense by US Treasury Department in 1998 under the Electronic Check project which was carried out by Financial Services Technology (FSTC) (Anderson, 1998). In Hong Kong, the government has announced to introduce the Electronic Check system in December of 2015 and Hong Kong citizens can pay government bills through the “Pay e-Cheque” Portal (2016), and nearly $540 million has been cleared through this payment rail. As reported by Pymts (2016), the Hong Kong Monetary Authority (HKMA) and the Guangzhou branch of the People’s Bank of China are looking forward to build out eCheck system to facilitate cross-border trade deals between Hong Kong and the free trade zones of Guangdong. By now, there have been 15 banks signed onto Hong Kong’s eChecking cross-border payments system for its trial phase.
Electronic Check, as of its name implying, is an electronic version of paper check, which is introduced to replace the paper check and keep all functions of paper check for online transactions. It is designed to accommodate the many individuals and entities that might prefer to pay on credit or through some mechanism other than cash. A buyer can contact sellers of goods and services. To complete a transaction, the buyer sends an eCheck to the seller for a certain amount of money. These eChecks may be sent using Email or other Transport methods. When deposited, the eCheck authorizes the transfer of account balances from the account against which the check was drawn to the account to which the check was deposited.
The eChecks are modeled on paper checks, while they have their own characteristics:
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They are initiated electronically. They use digital signatures for signing and endorsing and require the use of digital certificates to authenticate the payer, the payer’s bank and bankaccount.
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They are delivered either by direct transmission using telephone lines or by public networks such as the Internet.
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Reduce bad check write-offs, returned-check fees and check collection hassles.
ECheck is not merely a simple electronic version of paper check, but also owns some unique security features. The major advantages of eChecks compared with paper check are as follows:
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First of all, the eCheck meets the needs of clients under the global economy environments. More and more global business activities occurred each day all over the world, therefore, a rapid, convenient, secure and 24-hour available payment instrument is needed. ECheck fits current business practices for all kinds of customers, including individuals, small and mid-size businesses, government and other organizations. Issuing and transferring an electronic check is more time saving and economical than printing and mailing paper checks to customers. Moreover, Ash The Great (2016) points out that the eCheck transaction fee is much less than credit card, which is the most popular online payment method today.
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With the concern of environment, paper check is not environmental-friendly. 70 billion of paper checks are spent per year, and banks in Hong Kong spent up to 1.7 billion Hong Kong dollars on processing these paper checks every year (Ash The Great, 2016).
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Next, eCheck contains the same information as what paper check contains, which can be presented in electronic format, as well as paper format. Although eCheck is a new concept for banking industry, it is based on the same rich legal framework as paper check, which makes it much easier for customers to accept.
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Last but not least, the design of eCheck keeps all functions of paper check and avoids the shortness of paper check system with the security techniques. ECheck makes check forgery and check double-spending difficult or can be detected easily in the eCheck system.