EB/U3 Topic 3 Infrastructure Issues in EPS, Electronic Fund Transfer
INFRASTRUCTURE ISSUES IN EPS
Infrastructure is necessary for the successful implementation of electronic payments. Proper Infrastructure for electronic payments is a challenge.
- For electronic payments to be successful, there is the need to have reliable and cost effective infrastructure that can be accessed by majority of the population.
- Electronic payments communication infrastructure includes computer network. such as the internet and mobile network used for mobile phone.
- In addition, banking activities and operations need to be automated. A network that links banks and other financial institutions for clearing and payment confirmation is a pre-requisite for electronic payment systems. mobile network and Internet are readily available in the developed world and users usually do not have problems with communication infrastructure.
- In developing countries, many of the rural areas are unbanked and lack access to critical infrastructure that drives electronic payments.
- Some of the debit cards technologies like Automated Teller Machines (ATMs) are still seen by many as unreliable for financial transactions as stories told by people suggested that they could lose their money through fraudulent deductions, debits and other lapses for which the technology had been associated with by many over the last few years.
- Telecommunication and electricity are not available throughout the country, which negatively affect the development of e-payments. The development of information and communication technology is a major challenge for e-payments development. Since ICT is in its infant stages in Nepal, the country faces difficulty promoting e-payment development.
ELECTRONIC FUND TRANSFER
Electronic Funds Transfer (EFT) is the electronic transfer of money from one bank account to another, either within a single financial institution or across
multiple institutions, via computer-based systems, without the direct intervention of bank staff. EFT transactions are known by a number of names. In the United States, they may be referred to as electronic checks or e-checks.
The term covers a number of different payment systems, for example:
- Cardholder-initiated transactions, using a payment card such as a credit or debit card
- Direct deposit payment initiated by the payer
- Direct debit payments for which a business debits the consumer’s bank accounts for payment for goods or services
- Wire transfer via an international banking network such as SWIFT
- Electronic bill payment in online banking, which may be delivered by EFT or paper check
- Transactions involving stored value of electronic money, possibly in a private currency.
HOW IT WORKS ?
EFTs include direct-debit transactions, wire transfers, direct deposits, ATM withdrawals and online bill pay services. Transactions are processed through the Automated Clearing House (ACH) network, the secure transfer system of the Federal Reserve that connects all U.S. banks, credit unions and other financial institutions.
For example, when you use your debit card to make a purchase at a store or online, the transaction is processed using an EFT system. The transaction is very similar to an ATM withdrawal, with near-instantaneous payment to the merchant and deduction from your checking account.
Direct deposit is another form of an electronic funds transfer. In this case, funds from your employer’s bank account are transferred electronically to your bank account, with no need for paper-based payment systems.
Types of EFT payments
There are many ways to transfer money electronically. Below are descriptions of common EFT payments you might use for your business.
Direct deposit lets you electronically pay employees. After you run payroll, you will tell your direct deposit service provider how much to deposit in each employee’s bank account. Then, the direct deposit provider will put that money in employee accounts on payday. Not all employers can make direct deposit mandatory, so make sure you brush up on direct deposit laws.
Wire transfers are a fast way to send money. They are typically used for large, infrequent payments. You might use wire transfers to pay vendors or to make a large down payment on a building or equipment.
ATMs let you bank without going inside a bank and talking to a teller. You can withdraw cash, make deposits, or transfer funds between your accounts.
Debit cards allow you to make EFT transactions. You can use the debit card to move money from your business bank account. Use your debit card to make purchases or pay bills online, in person, or over the phone.
Electronic checks are similar to paper checks, but used electronically. You will enter your bank account number and routing number to make a payment.
Pay-by-phone systems let you pay bills or transfer money between accounts over the phone.
Personal computer banking lets you make banking transactions with your computer or mobile device. You can use your computer or mobile device to move money between accounts.