Payment Systems Electronic Authentication

1
Payment SystemsElectronic Authentication
Retail Payments Office
Federal Reserve Bank of Boston 600 Atlantic
Avenue P.O. Box 2076 Boston, MA 02106-2076

• Michael Versace
• Retail Payments Office
• Federal Reserve Banks
• June 1999

2
Growing Payments Market

• Transformation in the Payments System
• Changing customer priorities
• Technology advances and improvements
• New participants
• Blurring of financial industry boundary

3
Transformation Results

• Proliferation of payment vehicles
• Fragmentation of the value chain
• New competitors, new solutions, still old
  problems (e.g., authentication)
• Winners and losers

4
Commerce and Payments

• Technology enables current and new forms of
  commerce
• Payments follow commerce
• Payments technology must keep pace with commerce

5
Payment Systems Components

• A basis of value exchange
• business contract, consumer purchase
• An accounting environment to record claims on
  value
• ACCOUNTS and rules
• Logical and physical network to transfer claims
  on value

6
Electronic Authentication

• PINS evolve to more sophisticated solutions
  designed for commerce environments
• PKI comes in many flavors today
• far too early in market development to rule out
  fundamental business processes
• Electronic authentication of monetary transfers
  using PKI ultimately links digital signatures to
  ACCOUNTS

7
Digital Signature Authority

• Authority models are business processes, not
  technologies
• Account authority retains the linkage between
  PAYMENT systems and CREDIT systems
• effective risk management
• Account authority has the potential to preserve
  aspects of privacy

8
Account Authority Practice

• Concept being tested as part of Echeck in the US
• Singapore, Canadian, other programs planned
• Rules for retail payment systems provide guidance
  on use of digital signatures, without
  certificates, when pre-existing relationships
  exist

9
Questions

• Michael Versace
• Program Manager - Emerging Payment Systems
• Federal Reserve Financial Services
• [phone]
• michael.versace_at_bos.frb.org
• Echeck Web site
• www.echeck.org