Electronic funds transfer instruments

What is claimed is:

1. A computer-based method comprising

creating an electronic instrument for effecting a transfer of funds from an account of a payer in a funds-holding institution to a payee, the instrument including an electronic signature of the payer, and

appending, to the electronic instrument, digital representations of a verifiable certificate by the institution of the authenticity of the account or the account holder.

2. A computer-based method comprising

effecting a transfer of funds from an account of a payer in a funds-holding institution to a payee in accordance with instructions of the payer, by

creating an electronic instrument which includes digital representations of (a) the instructions, (b) the identity of the payer, (c) the identity of the payee, and (d) the identity of the funds-holding institution,

including with the electronic instrument, digital representations of (a) a verifiable signature of the payer, and (b) a verifiable certificate by the institution of the authenticity of the payer and of a public signature verification key of the payer,

electronically delivering the electronic instrument to the institution at least in part via a publicly accessible data communication medium, and

at the institution, verifying the signature of the payer and the certificate in connection with transmitting the funds to the payee.

3. The method of claim 2 further comprising

including an account number in the electronic instrument.

4. The method of claim 1 in which the account comprises a deposit account in the institution.

5. The method of claim 1 in which the account comprises a credit account in the institution.

6. The method of claim 1 in which the electronic instrument comprises an electronic substitute for a check.

7. The method of claim 1 in which the electronic instrument comprises an electronic substitute for a credit card transaction slip.

8. The method of claim 1 in which the publicly accessible data communication medium is unsecured.

9. The method of claim 1 in which the institution comprises a bank.

10. The method of claim 1 further comprising

appending to the electronic instrument, digital representations of a verifiable signature of the payee.

11. The method of claim 1 further comprising

appending to the electronic instrument, digital representations of a verifiable certificate by an institution which holds an account of the payee.

12. The method of claim 11 further comprising

appending to the electronic instrument, digital representations of a verifiable certificate by a central banking authority with respect to the institution which holds the payee's account.

13. The method of claim 1 further comprising

delivering the electronic instrument in part via a private controlled secure communication medium.

14. The method of claim 1 further comprising

delivering the electronic instrument to the payee at least in part via a publicly accessible data communication medium.

15. The method of claim 1 further comprising

delivering the electronic instrument to an institution which holds an account of the payee at least in part via a publicly accessible data communication medium.

16. The method of claim 1 further comprising

delivering the electronic instrument from an institution which holds an account of the payee to the funds-holding institution via an electronic clearing house.

17. The method of claim 1 further comprising

at the payee, verifying the signature of the payer and the certificate of the institution.

18. The method of claim 1 further comprising

at an institution holding an account of the payee, verifying the signature of the payer and the certificate of the funds-holding institution.

19. The method of claim 1 in which the signature is generated by public key cryptography.

20. The method of claim 1 in which the appending step is done by a separate signature device from the device which performs the creation of the electronic instrument.

21. The method of claim 1 in which the electronic instrument comprises an electronic substitute for a traveler's check.

22. The method of claim 1 in which the electronic instrument comprises an electronic substitute for a certified check.

23. The method of claim 1 in which the electronic instrument comprises an electronic substitute for a cashier's check.

24. The method of claim 1 further comprising

delivering from the payee to the payer, at least in part via a publicly accessible communication medium, digital representations of (a) a proposed transaction, and (b) a verifiable signature of the payee.

25. The method of claim 1 further comprising

automatically transferring information from the electronic instrument to a computer-based accounting system that tracks accounts receivable or processes orders.

26. The method of claim 1 further comprising

maintaining a log of electronic instruments created.

27. Apparatus comprising

a token having a memory, a processor, and a port for communication with a computer, and in which

the memory contains

a private encryption key associated with an account in a funds-holding institution and which is usable to append a secure, verifiable signature to an electronic payment instrument drafted on the account, and

certification information provided by the institution and which is usable to append a secure, verifiable certificate to the instrument to certify a relationship between an owner of the signature and a public key of the owner.

28. The apparatus of claim 27 further comprising

means for assigning a unique identifier to each electronic payment instrument.

29. The apparatus of claim 27 in which the portable token comprises a PCMCIA compatible card.

30. The apparatus of claim 27 in which the portable token comprises a smart card.

31. The apparatus of claim 27 in which the token comprises an add-in computer board or a black box crypto-processor.

32. The apparatus of claim 27 in which the certification information has a limited useful life.

33. The apparatus of claim 27 in which the memory also contains certification information provided by a central banking authority and which is usable to append secure, verifiable certificates to electronic payment instruments to certify the authenticity of the funds-holding institution.

34. The apparatus of claim 33 in which the certification information provided by the central banking authority has a limited useful life.

35. The apparatus of claim 33 in which the central banking authority comprises a United States federal reserve bank.

36. The apparatus of claim 27 in which the memory also contains a register of electronic payment instruments to which signatures have been appended.

37. The apparatus of claim 27 in which the appended signature comprises a signature of a payer who holds the account in the institution.

38. The apparatus of claim 27 in which the appended signature comprises an endorsement signature of a payee.

39. The apparatus of claim 27 in which the memory also contains a personal identification number for controlling access to the memory.

40. A computer-based method of creating an electronic payment instrument comprising

forming digital payment data which represents the identity of the payer, the identity of the payee, and the amount to be paid,

in a secure hardware token, appending a digital signature and a verifiable certificate by a funds-holding institution of the authenticity of the payer to the data.

41. A computer-based method of endorsing a payment instrument comprising

entering information included in the payment instrument in digital form into a secure hardware token, and

in the token, appending a digital signature and a verifiable certificate by a funds-holding institution of the authenticity of the payer to the digital information.

42. A computer-based method for regulating use of account numbers with respect to accounts in a funds-holding institution, comprising

assigning digital account numbers for use by account holders in creating electronic instruments, the digital account numbers being distinct from non-electronic account numbers used by account holders with respect to non-electronic instruments,

at the fund-holding institution, accepting electronic instruments from account holders only if the electronic instruments include one of the digital account numbers.

43. The method of claim 42 in which each digital account number is linked with a non-electronic account number, and the two numbers are linked with a common account in the institution, so that electronic instruments and non-electronic instruments may be drawn against the same account.

44. A computer-based method of attaching a document to a related electronic payment instrument comprising,

forming a cryptographic hash of the document, and

appending the hash to the electronic payment instrument.

45. A computer-based method for reducing fraud with respect to deposit of an electronic instrument with a funds-holding institution, comprising

including with the electronic instrument a key-encrypted signature of the payee and a public key of the payee, and

at the institution, automatically checking a routing code and an account number to which the electronic instrument relates before accepting the electronic instrument.

46. A computer-based method for reducing fraud associated with an electronic payment instrument comprising

appending to the electronic payment instrument a cryptographic signature associated with a party to the instrument and a digital representation of a verifiable certificate by a funds-holding institution of the authenticity of the party, and

upon receipt of the electronic payment instrument, automatically checking the cryptographic signature and the certificate against cryptographic signature information of other electronic payment instruments previously received.

47. A computer-based method for use with an electronic payment instrument comprising

including in the electronic payment instrument, a serial number, a payment amount, a payer, a payee, and a date,

transmitting the electronic payment instrument via a communication network from an inquiring party to a funds-holding institution having an account associated with the payer,

at the funds-holding institution determining whether another electronic payment instrument having the same payer and the same serial number had previously been issued,

electronically advising the inquiring party based on the determination.

48. A computer-based method for use with an electronic payment instrument comprising

printing a paper version of the electronic payment instrument with digital signatures and digital certificates by an issuing bank of the authenticity of an account or an account holder to which the instrument relates,

passing the paper version through the check clearing system to the issuing bank,

at the issuing bank, scanning the paper version to derive a digital version, and

at the issuing bank electronically verifying the digital version based on the signatures and the certificates.

49. Apparatus for maintaining bank account information electronically comprising

a portable token holding information for enabling a user to add signatures and certifications by a funds-holding institution of the authenticity of the account or an account holder to an electronic banking instrument drawn on the account, and

a separate portable token holding a register of transactions associated with the account.

50. The apparatus of claim 49 in which the separate portable token comprises a PCMCIA card or a smart card.

51. A method for regulating the use of an electronic financial document comprising

including with the document an electronic signature and an electronic certification by a funds-holding institution of the validity of an account to which the document relates,

accepting the electronic financial document as valid only if the signature and certification are electronically determined to be valid.

Description Submit all comments and votes

BACKGROUND

The invention relates to electronic funds transfer instruments.

As seen in FIG. 1, in a typical financial transaction 10 a payer 12 transfers funds to a payee 14. Individual payers and payees prefer different payment methods at different times, including cash, checks, credit cards and debit cards. The transfer of funds between the payer 12 and the payee 14 may involve intermediate transactions with one or more banking institutions 16. The banks' functions include collecting and holding funds deposited by account holders and responding to instructions from the account holders. Checks are an example of financial transactions which invoke these banking institution functions.

FIG. 2 shows a paper check transaction 20, in which a check 22 is transferred from the payer 12 to the payee 14. The check 22 is typically found in a checkbook 24. Each check has several blank spaces (for the date 34, the name of the payee 30, the sum of money to be paid 28, and the signature of the payee 38) to be filled out by the payer 12. As each check is written, the payer 12 keeps a record of the check in a check register 26 which lists check transactions including the sum to be paid 28, the name of the payee 30, the identification number of the check 32, and the date of the transaction 34.

In the body of the check 22, the payer 12 instructs the payer's bank 36 to pay the stated sum of money 28 to the payee 14. The check 22 identifies the payer's bank 36, the payer's account number 40 (using magnetically readable characters) at the payer's bank, and the payer 23 (usually by printed name and address). After filling in the date 34, the name of the payee 30 and the sum of money 28 as ordered by the payee 14, the payer signs the check 22. A payee typically considers a check authentic and accepts it for payment if it contains the signature 38 of the payer, the printed identification of the payer 23 and the printed name and logo 42 of the payer's bank 36, and does not appear to be altered. The check 22 also contains a routing and transit number 25 which indicates the routing of the check to the payer's bank 36 for presentment.

After the payer 12 presents the completed check 22 to the payee 14 in a financial transaction (such as a sale of goods or services), the payee 14 endorses the check 22 on the back with the payee's signature 44 and deposits the check 22 with the payee's bank 46. If the check looks authentic, the payee bank 46 provisionally credits the payee's account 48 for the amount of money designated on the face of the check 28 pending clearance through the federal reserve system and acceptance and payment by the payer's bank 36.

The payee's bank 46 routes the check 22 to the payer's bank, possibly using the federal reserve bank clearing house 50 or other established clearing arrangement, which uses the routing and transit number 25 to deliver it to the payer's bank 36, which then verifies the authenticity of the check 22 and (at least for some checks) the signature 38 of the payer 12. If the check 22 is authentic and the payer 12 has sufficient funds in her account 40 to cover the amount of the check 28, the payer's bank 36 debits the payer's account 40 and transfers funds to the payee's bank 46 for the amount designated on the check 28. A complete check transaction 20 thus includes verification steps performed by the payee 14 and the payer's and payee's banks 36 and 46.

The banks 36 and 46 send bank statements 52 and 54 to the payer 12 and payee 14, respectively, which reflect the events of the transaction 20 pertinent to each of the parties for reconciliation of their accounts with their records.

Processing a paper check requires time as the physical check is routed to the payer, the payee, the payee's bank, the clearing house and the payer's bank. The same is true of other types of financial transactions involving paper instruments, such as credit card slips generated during a credit card sale. In a credit card transaction, a merchant makes an impression of the customer's card, which the customer then signs, to function as a receipt for the transaction. The merchant typically obtains a positive acknowledgement or credit authorization from the customer's credit card company before accepting the credit card slip. This assures that payment will be received.

Several mechanisms for using electronic communication to substitute for paper flow in financial transactions are in use or have been proposed.

Electronic Check Presentment (ECP) is a standard banking channel used to clear checks collected by banks prior to or without routing the physical checks. The Automated Clearing House (ACH) is an electronic funds transfer system used by retail and commercial organizations. The ACH acts as a normal clearing house, receiving a transaction over the network and then splitting and routing the debit and credit portions of the transaction to the payer's and the payee's banks. Electronic Data Interchange (EDI) is a similar electronic transactional system, primarily used for the interchange of business documents such as invoices and contracts. With EDI, the funds transfer is frequently transmitted over other financial networks, such as through electronic funds transfer or ACH.

So-called home banking allows a consumer to use a home or personal computer to, e.g., request that the bank pay certain bills.

Electronic funds transfer (EFT), or wire transfer, is used for direct transfer of funds from a payer to a payee, both usually corporations, using a bank's centralized computer as an intermediary. The EFT system may be used in conjunction with the ACH system described above.

Automatic teller machines (ATM) and point of sale (POS) devices allow an individual to conduct a transaction from a location outside the home. ATM's have remote computer terminals connected to the user's bank which allow access, directly or indirectly through switching networks, to the user's account in the central computer of the bank. Similarly, POS devices are remote computer terminals located at a place of business which allow access to an individual's account information stored in a computer within a network of financial institutions, to permit transfer of funds from the user's account to the merchant's account at another bank.

Check imaging, another electronic transaction procedure, involves the scanning of a paper check by a scanner, which digitizes the image of the check pixel by pixel and stores the image electronically in a memory. The image may then be transferred electronically to substitute for or precede the physical delivery of the check, e.g., to truncate the clearing process. The image of the check may be recreated on a computer monitor or on paper for verification by the appropriate banking institutions.

Several systems are currently used to secure electronic financial transactions. For example, IC chip cards, or smart cards, are small devices (containing chips with memories) which are capable of exchanging data with a computer or a terminal and of performing simple data processing functions, and are thus more versatile than a simple credit card. The smart card is portable and may be easily used in POS and ATM environments.

SUMMARY

In general, in one aspect, the invention features a computer-based method in which an electronic instrument is created for effecting a transfer of funds from an account of a payer in a funds-holding institution to a payee, the instrument including an electronic signature of the payer. A digital representation of a verifiable certificate by the institution of the authenticity of the account, the payer, and the public key of the payer is appended to the instrument. This enables a party receiving the instrument, e.g., the payee or a bank, to verify the payer's signature on the instrument.

Implementations of the invention may also include one or more of the following features. The electronic instrument may include digital representations of (a) payment instructions, (b) the identity of the payer, (c) the identity of the payee, and (d) the identity of the funds-holding institution. Digital representations of a verifiable signature of the payer may also be appended to the electronic instrument. The electronic instrument may be delivered electronically to the institution at least in part via a publicly accessible data communication medium. At the institution, the signature of the payer and the certificate may be verified in connection with transmitting funds to the payee. An account number may be included in the electronic instrument. The account may be a deposit account or a credit account. The instrument may be an electronic substitute for a check, a traveler's check, a certified check, a cashier's check, or a credit card charge slip. The publicly accessible data communication medium may be unsecured. The institution may be a bank.

Also appended to the instrument may be digital representations of a verifiable signature of the payee, a verifiable certificate by an institution which holds an account of the payee, and a verifiable certificate by a central banking authority with respect to the institution which holds the payee's account.

Delivery of the instrument may be in part via a private controlled secure communication medium and in part via a publicly accessible data communication medium. The electronic instrument may be delivered from an institution which holds an account of the payee to the funds-holding institution via an electronic clearing house.

At the payee, the signature of the payer and the certificate of the institution may be verified. At the institution holding an account of the payee, the signature of the payer and the certificate of the funds-holding institution may be verified.

The signatures may be generated by public key cryptography. The appending step may be done by a separate signature device from the device which performs the creation of the electronic instrument.

Digital representations of a proposed transaction and a verifiable signature of the payee may be delivered from the payee to the payer at least in part via the publicly accessible communication network.

Information may be automatically transferred from the electronic instrument to a computer-based accounting system that tracks accounts receivable or processes orders. A log of electronic instruments may be created.

In general, in another aspect, the invention features apparatus including a portable token having a memory, a processor, and a port for communication with a computer. The memory contains a private encryption key associated with an account in a funds-holding institution and which is usable to append a secure, verifiable signature to an electronic payment instrument drafted on the account.

Implementations of the invention may include one or more of the following features. The memory may contain certification information provided by the institution and which is usable to append secure, verifiable certificates to electronic payment instruments to certify a relationship between an owner of the signature and a public key of the owner. A unique identifier may be assigned to each electronic payment instrument. The portable token may be a PCMCIA compatible card, smart card or smart disk, which may internally hold a private signature key and a secure memory for the check serial number. The certification information may be given a limited useful life. The memory may also contain certification information provided by a central banking authority and which is usable to append secure, verifiable certificates to electronic payment instruments to certify the authenticity of the funds-holding institution. The certification information provided by the central banking authority may have a limited useful life. The central banking authority may be a United States Federal Reserve Bank. The memory may also contain a complete or partial register of electronic payment instruments, or a subset of the information contained in the instruments, to which signatures have been appended. The appended signature may be a signature of a payer who holds the account in the institution, or an endorsement signature of a payee. The memory may also contain a personal identification number for controlling access to the memory.

In general, in another aspect, the invention features a computer-based method of creating an electronic payment instrument. Digital payment data is formed which represents the identity of the payer, the identity of the payee, and the amount to be paid. Then, in a secure hardware token, a digital signature is appended to the data.

In general, in another aspect, the invention features a computer-based method of endorsing a payment instrument by entering information included in the payment instrument in digital form into a secure hardware token and, in the token, appending a digital signature to the digital information.

In general, in another aspect, the invention features a computer-based method for regulating the use of account numbers with respect to accounts in a funds-holding institution. Digital account numbers are assigned for use by account holders in creating electronic instruments, the digital account numbers being distinct from non-electronic account numbers used by account holders with respect to non-electronic instruments. At the fund-holding institution, electronic instruments are then accepted from account holders only if the electronic instruments include one of the digital account numbers. In implementations of this feature, each digital account number may be linked with a non-electronic account number, and the two numbers may be linked with a common account in the institution, so that electronic instruments and non-electronic instruments may be drawn against the same account.

In general, in another aspect, the invention features a computer-based method of attaching a document to a related electronic payment instrument by forming a cryptographic hash of the document, and appending the hash to the electronic payment instrument.

In general, in another aspect, the invention features a computer-based method for reducing fraud with respect to deposit of an electronic instrument with a funds-holding institution. A key-encrypted signature of the payee, a public key of the payee, a routing code of the institution, and a number of the payee's account in the institution are included with the instrument, and, at the institution, there is automatic checking of the routing code and the account number before accepting the electronic instrument.

In general, in another aspect, the invention features a computer-based method for reducing fraud associated with an electronic payment instrument. A cryptographic signature associated with a party to the instrument is appended to the instrument. Upon receipt of an electronic payment instrument, there is automatic checking of the cryptographic signature against cryptographic signature information of other electronic payment instruments previously received.

Advantages of the invention may include one or more of the following.

The invention provides an all-electronic payments and deposit gathering instrument that can be initiated from a variety of devices, such as a personal computer, screenphone, ATM or payments accounting system. Financial accounts may be rapidly and securely settled between trading partners over open public or proprietary networks, without requiring pre-arrangement, by interconnection with the existing bank clearing and settlement systems infrastructure. The integration of controlled existing banking communication systems with rapidly growing public networks in a secure fashion will allow for implementation and acceptance by banking institutions, industry, and consumers.

The invention addresses the problem of gathering deposits electronically over public networks, since it enables all customers, retail and commercial, to gather, transmit and deposit, e.g., checks, into their accounts without physically going to a bank branch. The invention provides an electronic payment alternative for trading using public data networks to conduct transactions.

The invention to a degree electronically mimics heavily-used and well-understood existing paper check processes to enable it to be readily accepted by the marketplace. By retaining the basic characteristics and flexibility of, e.g., the paper check, the invention may be adopted more rapidly. Due to its similarity to, e.g., paper checks, the invention can be used within the structure of existing laws, regulations, and standard business practices.

A variety of types of payment instruments may be implemented, e.g., certified checks, cashiers checks and credit card charge slips, and additional capabilities may be provided, e.g., future dating, limit checks, and multi-currency payments.

The invention may be used in all market segments, from individual consumers to large corporations. It will enable businesses to safely and cheaply complete payments over public networks. Because the contents of the payment instrument may be attached to the trading partner's remittance information, the instrument will easily integrate with existing or new applications, such as accounts receivable systems.

The security of the payment instruments enables open public networks to be linked to the financial payments and bank clearing networks in a secure fashion. The use of digital signatures, hardware based signing, and banks as certification agents, make the instruments trusted and secure. They are tamper-resistant due to the use of cryptographic signatures. This will provide greater security and reduced fraud losses for all parties in the payments process by eliminating most of the common causes of bad paper checks. To provide confidentiality, the instruments may also be encrypted when sent over public networks.

The use of public-key certificates enables easy electronic authentication by a payee, and the payee's and payer's banks. Digital signatures can be validated automatically.

Since the system can be fully automated, and new processing can be done outside of existing applications, such as a standard Demand Deposit Account (DDA), the cost of processing an electronic instrument will be quite low, and the costs of implementation minimized. To further minimize implementation costs, the electronic instruments may be integrated with the existing bank infrastructure, including some of the mechanisms currently used for interbank clearing of checks and electronic payments, such as bilateral arrangements, ACH and ECP.

Payers of all sizes gain substantial benefits. The use of electronic checks will be more cost effective than existing paper checks due to volume efficiencies and the automatic processing capabilities of computers. The use of electronic mail or electronic transmission is less costly than physically transporting paper. In addition to the significantly reduced costs of creating and mailing a payment (no check stock, envelopes, stamps, or incremental labor), the payer gains the ability to control the timing of payments, both through future dating of payments and through the increased reliability and delivery speeds of electronic mail.

The invention addresses the problem of fraud and supports prudent fraud management through integrated fraud prevention measures and distributed liability for fraud. These mechanisms will reduce most of the current causes of fraud, including forgery, alteration, duplication, and fraudulent depositing. In addition, because the electronic check implementation follows the check payment model, the potential liability of the banks for fraudulent transactions will be limited while equitably sharing the responsibilities for the integrity of the system among payer, payee, and banks.

An electronic check may be issued from personal financial software and other computing applications, through the use of an open programmatic tool set and application programming interfaces. Electronic instruments capability can be directly integrated into a payer's application, and does not require that a payer "go off-line" to complete a transaction. This benefit will be available to both consumers, through integration with packages such as Intuit's Quicken.TM., and businesses through integration with existing accounting systems.

Other advantages and features of the invention will become apparent from the following description and from the claims.

DESCRIPTION

FIG. 1 is a block diagram of a financial transaction.

FIG. 2 is a flow diagram of the steps of a check transaction.

FIG. 3 is a flow diagram of the steps of an electronic instrument transaction.

FIG. 4 is a block diagram of a workstation.

FIG. 5 is a format of an electronic check template example for use with the World Wide Web.

FIG. 6 is a format of an electronic check and deposit endorsement instrument.

FIG. 7 is a block format of a portion of an electronic check.

FIG. 8 is a format of a digital cryptographic signature based on DDS.

FIG. 9 is a block diagram of an electronic checkbook card.

FIG. 10 is a block diagram of the interaction between a screenphone and a server.

FIG. 11 is a block diagram of a certified check transaction.

FIG. 12 is a block diagram of a normal transaction flow.

FIG. 13 is a block diagram of a cash and transfer transaction flow.

FIG. 14 is a block diagram of a "lockbox" transaction flow.

FIG. 15 is a block diagram of a funds transfer transaction flow.

FIG. 16 is a block diagram of an electronic checkbook application interface.

FIGS. 17A and 17B are block diagrams of electronic check API's, modules and protocols.

At first we describe an implementation of the invention called an electronic check.

The electronic check is an electronic financial instrument which in some respects mimics the paper check. It is initiated and routed electronically, uses digital signatures for signing and endorsing, and relies on digital cryptographic certificates to authenticate the payer and payee and their respective banks and bank accounts and to provide a degree of security to all parties to the transaction.

As seen in FIG. 3, the use of electronic checks may take advantage of the interaction between publicly available, relatively unsecure electronic networks 65, such as the dial-up, Internet, wireless, or e-mail networks, and established, relatively secure non-public financial networks and systems 80. Public networks and banking networks are distinct entities in terms of the security of information during transmission over the two types of networks. Existing communications approaches in the banking system are secure and well disciplined. Public electronic networks are unsecured and to some degree less disciplined. The cryptographically sealed and authenticated electronic check passing across gateway 60 is the link between the public networks and secured financial networks. The gateway filters undesired traffic through and helps to prevent corruption of the secure financial networks resulting from intentional or unintentional access by persons operating in the public networks.

As seen in FIG. 3, in a broad sense, a transaction is initiated when a payer 12, e.g., a consumer, electronically receives a memorandum of a proposed transaction 66, such as a bill, invoice or order form, from a payee 14, e.g. a merchant. Alternatively, a transaction may be initiated by the payer 12 only. The memorandum 66 may contain the payee's digital signature, which may be generated by the payee's secure authenticator 68 using public key cryptography. The payer 12 validates the payee's signature by using the payer's public key to verify the payee's digital signature and thus authenticates the payee 14. To proceed with the transaction, the payer 12 electronically creates a financial instrument 74, e.g. an electronic check (e.g., on a personal computer), payable to the order of the payee 14, and signs and records it using the payer's secure authenticator 70. In effect, the secure authenticator 70 enables the payer 12 to digitally sign the instrument 74 with a private signature key and enter the transaction in a secure log, such as an electronic checkbook 71. A record of the transaction may also be kept in the payee's accounting system 72. The authenticator also appends to the check cryptographically signed certificates of, e.g., the payer's bank and the federal reserve bank authenticating the payer's account and the payer's bank, respectively. The pa