Electronic Funds Transfer

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e-payment system

ELECTRONIC FUND TRANSFER

By Prof T.R. Vaidyanathan

e-payment system
As payment is an integral part of mercantile process, electronic payment system is an integral part of ecommerce. The emergence of e-commerce has created new financial needs that in many cases cannot be effectively fulfilled by traditional payment systems. E-payment systems are becoming central to ecommerce as companies look for ways to server customers fasters and at lower cost, thereby paving way for new business opportunities

E-payment system
These payment systems have number of requirements Security Anonymity Control Low financial risks Traceability Privacy Integrity Standards(for Good transaction efficiency interoperability) Acceptability Convenience Cost

e-payment system
Conventional Vs Electronic Payment System To get into the depth of electronic payment process, it is better to understand the processing of conventional or traditional payment system. A conventional process of payment and settlement involves a buyer-to-seller transfer of cash or payment information (i.e. cheque and credit cards). The actual settlement of payment takes place in the financial processing network. A cash payment requires a buyer’s withdrawal from his/ her bank account, a transfer of cash to the seller, and the seller’s deposit of payment to his/her account. Non-cash payment mechanism are settled by adjusting i.e. crediting and debiting the appropriate accounts between banks based on payment information conveyed via cheque or credit cards.

e-payment system
Process of Electronic Payment System Electronic payment systems have been in operations since 1960s and have been expanding rapidly as well as growing in complexity. After the development of conventional payment system, EFT (Electronic Fund Transfer) based payment system came into existence. A real revolution in the meaning of electronic payment system came with the development of EFT technology. EFT is a technology (one of e-commerce technologies) that allows the transfer of fund from the bank account of the one person or organization to another. It is an important addition in organization that implements EDI in their organization.

Electronic Funds Transfer (EFT)
ELECTRONIC FUNDS TRANSFER (EFT) IS DEFINED AS “ANY TRANSFER OF FUNDS INITIATED THROUGH AN ELECTRONIC TERMINAL, TELEPHONIC INSTRUMENT, OR COMPUTER OR MAGNETIC TAPE SO AS TO ORDER, INSTRUCT, OR AUTHORIZE A FINANCIAL INSTITUTION TO DEBIT OR CREDIT AN ACCOUNT. EFT UTILIZES COMPUTER AND TELECOMMUNICATION COMPONENTS TO TRANSFER MONEY OR FINANCIAL ASSETS.

E-payment system
EFT was first electronic based system, which does not depend on a central processing intermediary. An electronic fund transfer is a financial application of EDI (Electronic Data Interchange), which sends credit card numbers or electronic cheques via secured private networks between banks and major corporations. To use EFT to clear payments and settle accounts, an online payment service will need to add capabilities to process orders, accounts and receipts. But a landmark came in this direction with the development of digital currency.

Electronic Funds 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. 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, 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

Electronic Funds Transfer (EFT)
EFT can be segmented into three broad categories 1)Banking and financial payments Large-scale or wholesale payments (e.g. bank-to-bank transfer) Small-scale or retail payments (e.g. automated teller machines...
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