ABAecom Poised for E-Commerce Growth

By Orr, Bill | ABA Banking Journal, October 1999 | Go to article overview

ABAecom Poised for E-Commerce Growth


Orr, Bill, ABA Banking Journal


By now, most bankers are convinced that Internet banking is for real. Ditto multi-billion-dollar levels of annual retail sales on the Internet, almost all of it by credit cards. ABAecom, a for-profit subsidiary of the American Bankers Association, is looking to the next phase of e-commerce: transactions that require legally valid signatures in order to be accepted by all the parties involved.

Traditionally, higher-value transactions are signed and sealed with handwritten signatures that make deals legally enforceable. That is, none of the parties can later repudiate a deal on the grounds that somebody else forged their consent, that they didn't realize they were making a legally binding deal, or that the description of the deal was changed from what they agreed to.

Most business-to-business transactions--contracts, purchase orders, legal descriptions, etc.--require such handwritten signatures. Government at all levels likewise requires signatures to receive licenses, services, or benefits. In turn, most banking transactions--among them registrations, applications, mortgages, and loans--are legally anchored to handwritten signatures.

Atoms move easier

Morphing the myriad practices of paper-based commerce into new electronic forms that can be implemented over the Internet calls for big changes in both communications technology and business culture. In view of such daunting challenges, why do most observers say that these changes are inevitable? In a word, productivity. It's simply a lot cheaper and faster to handle information, automatically, in the form of weightless atoms than it is to fuss with bulky paper documents. Many transactions can be done electronically at a tiny fraction of the cost of doing them in paper or in person. Futurists say that electronics could reduce the overall cost of commerce in the information age by as much as 30%.

But e-commerce can't happen until a worldwide electronic infrastructure comes into being to enable those billions upon billions of paperless transactions.

Most of the technology already exists and has been tested: a global communications network (the Internet), a thoroughly proved payments system (EFT), and mathematical encryption techniques that can actually bring financial transactions to a higher level of security than present paper systems afford. What remains to be developed is a new commercial culture that has the confidence and trust of all participants.

The key word here is trust--chiefly trust between parties that are unknown to each other.

ABA's vision, widely shared, is that banks are the most logical and generally acceptable choice to become the trust intermediaries for e-commerce. This is because banks are heavily supervised, are required to know their customers, and already have trusted financial relationships with nearly every business. ABAecom was set up last year under president Thomas Greco to take proactive steps to help banks fill that crucial role. ABAecom then partnered with Digital Signature Trust, a subsidiary of Zions National Bank in Utah, to help bankers use the new public key infrastructure (PKI) for e-commerce. PKI employs a combination of public and private keys to create legally enforceable digital signatures. (See "PKI in a Nutshell," below.)

The PKI has actually been used for a few years, although only for assuring the security of messages sent over the Internet--between, say, a consumer's PC and her bank's web server. But that system doesn't guarantee the bank's identity. Was the website claiming to be FirstBest National Bank really that bank, or could it be an imposter website created by bad guys to get into your bank account? (Several such imposters have been exposed recently.)

Who goes there?

ABAecom's first project is to guarantee the identity of any member bank's website. It does this with its SiteCertain seal, free to any ABA member, which appears on the bank's website. …

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