Electronic Funds Transfer

Electronic data interchange is all about electronic swapping of data which involves a number of mini and microcomputers in a systematically designed structure. It is also called electronic data processing. It is actually relocating funds between financial institutions. This enables a large number of commercial centers to carry out instant transactions orders and invoices. The EFT is much more convenient, easy method than the older methods of transferring money.

Although the impulse of Electronic data exchange began in the 1960's it was only in the late twentieth century that it gained prominence. This gave birth to network-based- technologies and also electronic commerce and business extranets that connected customers and suppliers. The value of paper work for financial exchanges rapidly diminished. The use of electronic wire transfers, ATM transactions, Direct Deposit of payroll, business-to-business payment, and federal, state, and local tax payments increased stupendously. In1968, the Transportation Data Coordinating Committee (TDCC) was formed by a group of railroad businesses. At that time companies used individual transmission formats which were not universally accepted.

It was from the 70's that several companies adopted a common dissemination format. An external network kept a watch on the system. The formats were exclusive to a particular industry and did not match the other business formats.

Gradually by 1973 TDCC started gathering momentum which was useful in reducing the backlogs in the system. After a series of methods, the electronic fund transfer format was prescribed by the governing body. With this the modern EFT came into force which lessened the importance of handwritten work in transferring funds globally. With this the financial market witnessed a technologically advanced and rapid method of transferring funds.

With the EFT elaborate banking terms became simpler. It allowed the ISA+ payees to access direct premium payments from their bank accounts for government and account holders. The task of writing checks and bank processing charges, ease record keeping and postage fees became a thing of past. The automatic banking transactions update transaction history instantly.

The EFT trend is regulated by the Law of Electronic Fund Transfer Systems. It gives tips, provisions and clauses for electronic fund transfer payments and clearances. They also provide legal guidance on matters related to the duties of financial institutions dealing with EFT. It is compulsory for all institutions and people to provide information regarding EFT payment before beginning a transaction. Only after the instructions are provided the financial corporations pay employees and conduct other monetary transactions. The EFT will be successful only if the recipient bank has the ability to receive electronic method of transferring funds. Before beginning a transaction the information has to be crosschecked. Customers have to register with the Department of Revenue before making EFT payments.