Financial Transaction Processing
from Internet Business
Diverse needs for Internet-based financial transaction processing are already
evident. These range from the ability to pay to view/read Web pages at cents
per page, through use of the Net for Retailing
of Goods and Services, and on to electronic dealings with financial
institutions. A range of services are being developed or proposed to meet
the various levels of need for confidentiality, confirmation and risk management
in dealings between purchasers, vendors and financial service providers.
The great opportunity offered by the Net is to decompose the implicit contractual
arrangements, which have conventionally been established by joint physical
presence at point of sale, into a network of relationships based on established
confidence which can underpin spontaneous transactions between otherwise
illustration, by way of example, represents an idealised flow of information,
money and goods to underpin the purchase of those goods as a result of promotional
information found on the Web.
In this illustration, the purchaser will already have established a relationship
of trust with her banker which will allow her banker to validate the delivery
address and a confirming pin number while
not being concerned with details of the transaction beyond the price and
the vendor's banking arrangements which would be automatically supplied
from the order form. The electronic messaging needed to underpin this whole
model can be fully automated and encrypted
so that each party only 'sees' the details which they need to carry out
The much smaller and more frequent transactions to pay to view/read Web
pages will need a simpler, more immediate mechanism such as the concept
of 'digital cash' where a banker issues the user with an encrypted token
which is transmitted, debited and returned with its value adjusted each
time a new page is retrieved. To provide confidence in such a system, the
tokens may need to be held by recognised service providers rather than the
At the other end of the scale, commercial transactions from bill paying
to trading on speculative markets will require the user to have established
accounts with relevant institutions and to have a means for certifying transactions.
The Internet is already seeing the establishment of entirely net-based financial
institutions alongside the increasing Net presence of established financial
institutions rushing to provide analogues of their traditional products.
The rise of entirely Net-based financial institutions is expected to provide
a significant challenge to government regulation of financial markets.
The primary cost of becoming a provider of Financial Transaction Processing
services is the cost of establishing the credibility needed to compete with
established financial institutions. The operational costs are not significantly
different from those of any other Host Service
The credibility cost is likely to be much lower for those offering novel
financial mechanisms which meet the specific needs of Net-based transactions
than for those offering direct analogues of traditional mechanisms.
 or equivalent mechanism
 other than the purchaser's certification
of the order form and delivery confirmation