Claims Involving Electronic Payment Systems

Many existing and proposed electronic payment systems are quite insecure and the number of claims involving fraudulent or disputed transactions is rising steeply. The banks’ recent action in limiting customers’ liability for such transactions through automatic teller machine (ATM) systems to £50 may in practice limit ATM claims to those cases where consequential losses are involved, but growing fraud against signature-based card systems such as Switch will continue to be an issue, as will disputes involving other electronic payment and trading systems. In particular, Electronic Document Interchange (EDI) systems are proliferating with very little thought being given to protecting transactions against fraudulent manipulation. For these reasons, it is quite likely that practising lawyers will have to deal with electronic payment disputes at some time in their careers. The technical details can be extremely complex, as the proper cryptographic protection of transactions involves a range of mathematical and engineering disciplines. However the basic principles are relatively straightforward. In this article we outline a number of possible attacks against electronic trading and payment systems, and discuss the issue of liability for disputed transactions.