BACKGROUND TO THE INVENTION Consumers pay for goods and services by means of paper cheques, credit cards, bank transfers or with cash. Electronic payments can be made on the internet by an account holder to a payee, using a secure communication line between the payer and his bank. The payer submits instructions online as well as details relating to the payee directly to his bank. There are a number of risks associated with current payment methods and systems. These risks include fraud, forgery, robbery, costs, time delays on settlement, loss of payment instruments in transit and loss of electronic payment instructions.

Transactions are executed despite financial institutions refusing to divulge information with regard to their customers. Information that is available to transacting parties include a payer's account number, financial institution, branch code, date of payment, signature, payment instrument number and in

the case of credit cards, the credit card number and expiry date. A number of companies are moving to e-commerce and are providing e-commerce facilities for the procurement and supply of goods and services. However, the payment or settlement methods used are archaic and, it is estimated that a large percentage of payments for goods or services procured online are settled by means of paper cheques or in accordance with"off line"payment methods. There is also a resistance to divulge credit or debit card details on the internet for fear of security.

OBJECT OF THE INVENTION It is an object of this invention to provide a payment instrument and payment system which, at least partially, alleviates some of the abovementioned difficulties.

SUMMARY OF THE INVENTION In accordance with this invention there is provided a payment system comprising a host having a database for storing client account information; communication means for facilitating communication between clients and financial institutions; and processing means for processing electronic payments.

There is provided for the client account information to include the name, an access code, a password, a digital signature verification and a financial institution account number relating to a client.

There is further provided for the communication means to facilitate communication with the host over a computer network.

A further feature of the invention provides for the computer network to be the internet or a dedicated computer network such as a local area network or wide area network or a telecommunications network A yet further feature of the invention provides for the processing means to process electronic payments upon receipt of predetermined information and verification.

There is further provided for the electronic payments to be processed using electronic payment instruments.

A still further feature of the invention provides for the electronic payment instruments to be issued by financial institutions.

Further features of the invention provides for payer and payee access to be provided to the host database upon provision of an access code and a

password; for transactions to be verified by a payer and/or payee by the provision of a valid digital signature; for the processing means to records statistical data relating to transactions; for payment instructions to be issued to financial institutions by the host; for the host to notify a payer and/or payee of the issue of payment instructions; for the host to notify a payer or payee of the receipt of an instruction to stop payment on a transaction, to cancel accounts, disallow payments or to initiate a payment by a payee.

These and other features of the invention are described in more detail below.

BRIEF DESCRIPTION OF THE DRAWING A preferred embodiment of the invention is described below by way of example only, and with reference to the accompanying drawing which shows a schematic block diagram of a payment system.

DETAILED DESCRIPTION OF THE DRAWING With reference to the drawing, a payment system is generally indicated by reference numeral 1.

A host 2 facilitates payment by a payer 3 to a payee 4 by means of an electronic payment instrument (not shown), under such terms and conditions as may be agreed between the payer and payee (the parties), using a

communication network to effect the transaction. In this embodiment, the communication network is the internet.

A payer 3 accesses the host 2 website to open an account. Once an account is opened by the payer 3, the payer 3 can make a payment to a payee 4, access payee 4 initiated transactions, sign unsigned payments, cancel unsigned payments, stop payments, amend limits, enquire about the status of the account, block the account and close the account as is more fully described below.

The account will be opened provided that the payer 3 provides all relevant information as required by the host 2. The host 2 would require the payer's 3 account numbers of one or more accounts held at financial institutions 6.

The payer 3 sets a limit for payments as well as a threshold limit, which limit will apply to the number of payments and/or the monetary value of payments.

The host 2 allocates an access code, password and digital or advanced digital signature to the payer 3 as well as a number of electronic payment instruments.

The host 2 obtains electronic payment instruments from the financial institution 6 as would be normal for, for example, a cheque book. The host 2 records the details of electronic payment instruments that the payer's financial institutions 6 issued to the payer 3 and records these payment instruments on the host 2 system.

To initiate payment by a payer 3 to a payee 4, the payer 3 accesses the host 2 via the internet. The payer 3 provides his access code as well as a password to gain access and to proceed with a payment. The access code is the payer's 3 account number with his financial institution 6. The provision of an invalid password is recorded and stored by the host 2. The host 2 prompts the payer 3 for the type of service required and the payer 3 selects the option of making a payment from a list of options provided by the host 2.

To make a payment, the payer 3 enters information relating to the amount of the payment, details of the payee 4, the date of payment, a payment reference and a digital or advanced digital signature.

The payer 3 may not wish to immediately submit his digital or advanced digital signature and may do so at a later stage as described in more detail below.

In the event of no provision of the digital or advanced digital signature, the host 2 records the transaction as an unsigned payment and terminates any further action until such time as the payer 3 elects to sign the electronic payment instrument with his digital signature.

The payer 3 now submits the request to the host 2 to effect payment and the host 2 verifies that the payment instruments limit is not exceeded, threshold limits are not exceeded and the validity of the digital signature.

If the host 2 finds that the payer's 3 credit limit is exceeded, the host 2 informs the payer 3 and payee 4 of the negative results of the payment instrument and threshold limits. The host 2 prevents the transaction from proceeding and cancels the transaction. The host 2 keeps a record of the details of the transaction and records the details of the results of the payment instrument limit and threshold limit verification.

If there is a mismatch between the payer's 3 signature, the host 2 informs the payer 3 and the payee 4 of the negative results of the mismatched signature.

The host 2 prevents the transaction from proceeding and cancels the transaction. The host 2 records the details of the results of the mismatched signature against the payer's 3 account and notifies the relevant financial institution 6 and account holder (payer 3) of the mismatched signature check.

The host 2 then informs the account holder, and until further notice, no further access to the system is provided.

If the above tests are positive, the host 2 accepts the payment by the payer 3 to the payee 4 and records the payment on its system. The host 2 allocates a payment number to the transaction. The payer 3 and the payee 4 have the option of recording the details of the transaction electronically or to print a hard copy of the details of the transaction.

On the date of payment, the host 2, by reference to the transaction number referred to above, notifies the payer's financial institution 6 of a payment due

to the payee 4 with an instruction to debit the payer's 3 relevant account.

The payer's financial institution 6 is advised of the details of the payee's 4 account and the payee's financial institution 5, being the financial institution to which the funds are to be transferred. The payee financial institution 5 is notified of receipt of funds due to the payee 4 with instruction to credit the payee's 4 relevant account. The payee's financial institution 5 is advised of the details of the payer's 3 account and the payers financial institution 6, being the institution from which the funds are to be transferred, is notified of the transfer of funds from the payer's financial institution 6 to payees financial institution 5. This notification will form the basis of the settlement between the respective financial institutions.

The host 2 records the transaction once it has been successfully completed.

The payer's financial institution 6 can cancel, renounce or deny the transaction. The financial institution 6 advises the host 2 with reasons for such cancellation. The host 2 records the unpaid transaction on its system against the payer's 3 and payee's 4 accounts. The host 2 advises the payer 3 and payee 4 of the payer's financial institutions 6 reasons for cancellation of the payment. The host 2 will also advise the payee's financial institution 5 of the unpaid transaction and the reasons therefore.

A payee 4 may also initiate a payment transaction. To effect a payment by a payer 3 to a payee 4, with the payee 4 initiating the payment transaction, the payee 3 gains access to the host via the internet. The payee 3 provides an

access code and a password to gain access to the hosts website. As stated above, the access code is the payee's 4 account number with his financial institution 5.

Again, the submission of an invalid password will be recorded by the host for future reference.

The host 2 prompts the payee 4 for the type of service required and the payee 4 selects an option for the receipt of payment and provides the payer's 3 account number, the amount of the payment, the date of payment and a reference of payment. The payer 3 now has to enter his digital signature.

Once the payer 3 enters a digital signature, the same process as described above is followed to effect payment to the payee 4.

The payer 3 may at any time interrogate the host 2 for all unsigned payments due. Unsigned payments include those initiated by the payer 3 as well as those initiated by a payee 4. The information available to the payer 3 in respect of unsigned payments includes all relevant information regarding the payment. If the payer 3 elects to effect the transaction, he provides his digital signature. The host 2 then proceeds with the verification processes as described above to effect payment, also as described above.

The payer 3 may cancel any unsigned payment transaction by requesting the cancellation thereof. Reasons for the cancellation of the unsigned payment

transaction and the personal initiating the cancellation is provided, in the case of the payer 3 being a legal entity. The host 2 records the request for cancellation.

The payer 3 may also stop payment on a transaction. The reasons and the identity of the person initiating the stop payment is provided and recorded by the host 2. The host 2 advises the payer's 6 and payee's 5 financial institutions of the stop payment. A time limit for requesting stop payment may be applicable.

During the processes described above, the host 2 obtains information relating to the payer's 3 and payee's 4 customer account numbers, virtual payment instrument numbers, bank names, bank branch names, bank branch numbers, clearing house numbers, virtual payment instrument numbers issued, last virtual payment instruments issued, credit limits, credit thresholds, statuses of accounts and any other information necessary by the issuer of an electronic instrument to manage and control the issue thereof.

The host 2 can also record dates on which the accounts are opened, the dates on which accounts are closed and dates on which accounts are blocked. Reasons for the above may also be recorded by the host 2. The host 2 can further record the total number of instructions since the inception of an account, the total number of the transactions during a specific period, an average number of transactions during a specific period, an average of

value of transactions during a specific period, the highest value of a transaction during a specific period, the number of unpaid transactions since inseption, the number of unpaid transactions during a specific period, a number of post-dated payments, the value of post-dated payments, number of unsigned payments and number of payments generated through links.

The account holder, i. e. payer 3 or payee 4, may access the system to obtain information relating to transactions process to date, processed on specified date, payments and/or receipts processed or to be processed during a specified period, disallowed payments with reasons, cancelled payments, number of unused payment instruments, history of transactions processed, unsigned transactions and the identity of the initiator of transactions, number of transactions initiated by a specified payer 3, number of transactions initiated by a specified payee 4, number of transactions disallowed, number of payments cancelled by the payer, date on which account was opened, date on which account was closed, date on which account was blocked, reasons for accounts being blocked or closed, a total number of transactions for a specified period, average of value of transactions for a specified period, highest value of transactions for a specified period, number of attempts and violations, number of post-dated transactions and the value of post-dated transactions.

An account holder may also block an account and provide reasons for blocking his account. No processing of transactions is allowed on the account until the blocking of the account is listed by the relevant financial

institution. Payees 4 with post-date payments due to them are advised by the host 2 of the account blocked status.

An account may also be closed by an account holder through a financial institution 6. Payees 4 with post-dated payments due to them by the payer 4 are advised by the host 2 of the account closed status.

The system described herein provides additional security over prior art paper cheques in that the payee cannot see any details of the payer. The payee only receives payment in his account and does not have to bank a cheque.

The invention is not limited to the precise details as described herein. It will be appreciated by those skilled in the art that many variations to the embodiment described herein are possible without departing from the scope of the invention.