Electronic funds transfer, often abbreviated EFT, is a system for moving money from one account to another without the use of checks. This banking system transfers funds through computers and other electronic equipment. EFT includes five main types of facilities and systems: (1) automated teller machines, (2) telephone-banking systems, (3) computer-banking systems, (4) automated clearinghouses, and (5) point-of-sale terminals.
Automated teller machines (ATM’s),
also called cash machines or cash dispensers, are computer terminals at banks, airports, shopping centers, and many other locations. A customer inserts a special card into the machine and uses a keypad (set of buttons or keys) to enter a personal identification number (PIN). People use automated teller machines primarily to make deposits, transfer funds between accounts, and withdraw limited amounts of cash. ATM’s enable people to do their banking at many locations any hour of the day or night, seven days a week.
Telephone banking systems
enable customers to pay bills and transfer funds from one account to another by calling a special telephone number. Typically, the customer requests a transaction by pressing a sequence of buttons on the telephone in response to recorded messages. In this way, the customer gives instructions to a bank computer, which carries out the transaction.
Computer-banking systems
also allow people to pay bills and transfer funds from one account to another at any time. To use some computer-banking systems, the customer must have special software and a device called a modem that enables computers to communicate over telephone lines. Increasingly, however, banks offer online banking through the Internet. People simply visit their bank’s website to do their banking.
Automated clearinghouses
are computer centers for the automatic deposit of regular income and the automatic payment of many bills. An employer or the government directs the computer to credit a person’s account, for example, instead of issuing paychecks or Social Security checks. People can also arrange for insurance premiums, mortgage installments, and other regular payments to be transferred from their bank accounts to the billers’ accounts.
Point-of-sale (POS) terminals
are computer terminals in retail stores. To pay for a purchase, a customer presents a debit card, which a clerk puts into a terminal. In seconds, the system transfers the amount of the purchase from the customer’s bank account to the store’s bank account.
Other methods.
In France and other countries, smart cards are widely used for purchases. These cards have one or more embedded computer chips that store information about the user’s bank balance and purchases.
During the 1990’s, many banks in Europe began to use electronic money, also called e-money or e-cash. To make purchases in stores or over computer networks, users simply present proof of stored money value. In one e-money system, banks electronically transfer the customer’s stored value onto his or her smart card or other device.
