A PRESENTATION ON ELECTRONIC FUND TRANSFER {EFT}

Electronic Funds Transfer (EFT) is a system of transferring money from one bank account directly to another without any paper money changing hands.

EFT also refers to the computer-based systems used to perform financial transactions electronically.

Its use has become widespread with the arrival of personal computers, cheap networks, improved cryptography and the Internet.

ORIGIN
Electronic funds transfer originated from the common funds transfer of the past. Since the 19th century, and with the help of telegraphs, funds transfers were an usual thing in commercial transactions. Finally, it migrated itself to computers and became the electronic money transfers of today.

PROCESS
The funds transfer process generally consists of a series of electronic messages sent between financial institutions directing each to make the debit and credit accounting entries necessary to complete the transaction.

A funds transfer can generally be described as a series of payment instruction messages, beginning with the originators (sending customers) instructions, and including a series of further instructions between the participating institutions, with the purpose of making payment to the beneficiary (receiving customer).

The players that may be involved in a funds transfer transaction include:

Originator
e.g., individual, business entity - the initiator of a funds transfer; Beneficiary the ultimate party to be credited or paid as a result of a funds transfer;

Originators Financial Institution - the financial institution receiving the transfer instructions from the originator and transmitting the instructions to the next party in the funds transfer; Beneficiarys Financial Institution - the financial institution that is to credit or pay the beneficiary party; and Additional Financial Institutions - other institutions that may be required to effect the transaction.

The term is used for a number of different concepts: Cardholder-initiated transactions, where a cardholder makes use of a payment card Direct deposit Direct debit Electronic bill payment Transactions involving stored value of electronic money, possibly in a private currency Wire transfer Electronic Benefit Transfer

One of the most widely-used EFT programs is Direct Deposit, in which payroll is deposited straight into an employee's bank account, although EFT refers to any transfer of funds initiated through an electronic terminal, including credit card, ATM, Fedwire and point-of-sale (POS) transactions. It is used for both credit transfers, such as payroll payments, and for debit transfers, such as mortgage payments.

BENEFITS/PROS
The growing popularity of EFT for online bill payment is paving the way for a paperless universe where checks, stamps, envelopes, and paper bills are obsolete. The benefits of EFT include;
reduced administrative costs,

increased efficiency,
simplified bookkeeping, and greater security. However, the number of companies who send and receive bills through the Internet is still relatively small.

The main advantage of an electronic funds transfer is time. Since all the transaction is done automatically and electronically, the bank doesn't need to pay a person to do it, a person to drive the loans to the other bank, the cost of the transport, the cost of the maintenance of the transport, online auto insurance and the gas of the transport. EFT's have revolutionized modern banking.

Other benefit is immediate payment, which brings an up to date cash flow. You won't hear either about lost cheques causes by the inefficiency of normal mail (nowadays known as snail mail for its velocity compared to emails) and up to date bookkeeping.

The good thing is that a lot of merchants and consumers have found these advantages and have migrated to EFT's. So it isn't 1995 when only some companies offered this service and only some people used it for buying things and paying their bills. And, as the consumer base increased, also did the type of services and the reduction of transfer prices. EFT's are a good example of the wonders of an open market economy.

TYPES
1. EFTPOS
2. CARD BASED EFT

3. WIRE TRANSFER
4. ACH [Automated Clearing House]

1. EFTPOS (Electronic Funds Transfer at Point of Sale) is an Australian and New Zealand electronic processing system for credit cards, debit cards and charge cards.

2. Card-based EFT

EFT may be initiated by a cardholder when a payment card such as a credit card or debit card is used. This may take place at an automated teller machine (ATM) or point of sale (POS), or when the card is not present, which covers cards used for mail order, telephone order and

EFT
Wire Transfer

ACH

Both are performed through

Federal Reserve Bank System

3. Wire Transfer
Wire Transfer

Fed Wire

Book Transfer

Foreign Wire

Between two banks Within same bank Foreign bank

FRB open for fed wires up to 6:00 p.m. Book Transfers are memo posted up until midnight

Fed Wire Affects banks Reserve Accounts maintained at the FRB

Sending debited banks account at the FRB gets Receiving credited banks account at the FRB gets

Foreign exchange and Euro dollars through Clearing House for

4. ACH
ACH Network A batch-process, store and forward for future settlement Two types of ACH

ACH
ACH Credits
Direct Deposit.

ACH Debits
Direct Deposits Always initiated by sender

Debit Card Account

Senders account is debited and recei

Receivers Acct
Bank account Debit card account

Governing Org.

ACH Players

Trade Group

2
Originating Depository Financial Institution (ODFI) ACH Operator (FRB)

3
Receiving Depository Financial Institution (RDFI)

1
Originator (Company / Employer) Receiver (Company / Employee)

Authorization / Enrollment

TRANSACTION TYPES
SALE: where the cardholder pays for goods or service REFUND: where a merchant refunds an earlier payment made by a cardholder WITHDRAWAL: the cardholder withdraws funds from their account, e.g. from an ATM. The term Cash Advance may also be used, typically when the funds are advanced by a merchant rather than at an ATM

DEPOSIT: where a cardholder deposits funds to their own account (typically at an ATM) CASHBACK: where a cardholder withdraws funds from their own account at the same time as making a purchase INTER-ACCOUNT TRANSFER: transferring funds between linked accounts belonging to the same cardholder PAYMENT: transferring funds to a third party

ENQUIRY: a transaction without financial impact, for instance balance enquiry, available funds enquiry, linked accounts enquiry, or request for a statement of recent transactions on the account E TOP-UP: where a cardholder can use a device (typically POS or ATM) to add funds (top-up) their pre-pay mobile phone MINI-STATEMENT: where a cardholder uses a device (typically an ATM) to obtain details of recent transactions on their account

Electronic Funds Transfer System

EFT system facilitates inter-bank and intra-bank fund transfers among r 15 notified centers. EFT transfers are soon coming to replace demand drafts because they are faster, less expensive, and more secure. The funds are transferred to the beneficiarys account either on the same day or on the next

CENTRES OF EFT SERVICES

MUMBAI
CHENNAI

CHANDIGARH
GUWAHATI

KOLKATTA
NEW DELHI

HYDERABAD
JAIPUR

AHMEDABAD
BANGLORE BHUBANESHWAR

KANPUR
NAGPUR PATNA

A maximum of Rs.2 crore can be transferred in a single transaction. To make an EFT transfer, you need to fill up and submit an EFT request form. You can submit the form either online or at the branch where you hold an account. Provide the following information in the EFT form: The name of the beneficiary The name of your bank and branch name Your account number The amount to be remitted

Electronic Funds Transfer Association (EFTA)

The Electronic Funds Transfer Association (EFTA) is the nations leading inter-industry professional association promoting the adoption of electronic payment systems and commerce. For 30 years EFTA has provided its diverse membership with timely information and expert analysis regarding issues facing the electronic payments industry.

EFTA presents members with numerous opportunities each year to interact directly with legislators and regulators who make and implement public policy.
EFTAs mission is to give members a voice in the legislative and regulatory processes that will define their businesses far into the future.

Its diverse membership includes:

ATM networks and owners Information processors Card organizations Retailers Brokerage firms Hardware and software manufacturers Government agencies Industry consultants

Electronic Funds Transfer (EFT) Act

The Electronic Funds Transfer Act, also known as Regulation E, was implemented in the USA in 1978 to establish the rights and liabilities of consumers as well as the responsibilities of all participants in EFT activities.

The EFT Act does not apply to all pre-authorized plans. The EFT Act does not apply to automatic transfers from any account held in the name of the institution the consumer uses to the account the consumer uses. An eg: of this would be where the EFT Act would not apply to any automatic payments put towards a mortgage held by the financial institution where a consumer would hold their electronic funds account.

RIGHTS
The EFT allows consumers the right to choose their own institution if the consumer is required to receive their salary or government benefit check electronic funds transfer means.

The EFT Act also forbids the creditor or lender from asking a consumer to repay a loan or other credit via an electronic fund transfer. There is an exception; when there is an overdraft or checking plans.

Electronic payment can be made through;

ICICI BANK HDFC BANK

BANK OF INDIA

PNB
UBI

IDBI BANK
UTI BANK

SBI

How the payment made through electronic means is secure ?

Payment can be made only by logging on valid ID and password providded to the exporter by the bank. The transaction is carried out in secured environment through Banks gateway specially created for the purpose.

AUTHORIZATION
EFT transactions require communication between a number of parties. When a card is used at a merchant or ATM, the transaction is first routed to an acquirer, then through a number of networks to the issuer where the cardholder's account is held. Online authorization was standard practice and credit cards were processed using manual vouchers, each merchant would agree a limit ("floor limit) with his bank above which he must telephone for an authorization code. If this was not carried out and the transaction subsequently was refused by the issuer ("bounced").

Dual Message Authorization/Clearing

Depending on the business rules of the issuer, a "hold" may be placed on the funds authorised. This hold reserves that amount of money for a defined period. If a transaction is not cleared within the defined period then the "hold" will be removed and the funds made available again.

Single Message Authorization/Clearing

Some financial networks operate a single message solution, in which a transaction is authorised and cleared via the same message.

Authentication
EFT transactions may be accompanied by methods to authenticate the card and the cardholder. The merchant may manually verify the cardholder's signature, or the cardholder's Personal Identification Number {PIN}may be sent online in an encrypted form for validation by the card issuer.

Other information may be included in the transaction, some of which is not visible to the cardholder(for instance,magnetic stripe data), and some of which is requested from the cardholder (for instance, the cardholder's address).

EFT ERRORS
EFT is not a perfect system; therefore customers should still be diligent in reviewing their EFT statements for possible errors as they would with any other type of transaction. Customers have the right ask if any error occur in between and in further transaction.

LOSS OR THEFT
CUSTOMER LIABILITY If a customer reports the card missing to the instituition before any transactions occur,they are not held responsible. A customer can be liable for unauthorized withdrawals if their EFT card is lost or stolen and they do not follow criteria specified by the bank.

FINANCIAL INSTITUTION LIABILITY The financial must give the customer notice of their liability in case thecard is lost or stolen. This must include a phone number for reporting the lossand description of its error resolution process.