Page 226 - DMGT303_BANKING_AND_INSURANCE

Unit 11: Innovations in Banking

Types of ECS Notes

There are two types of ECS:
1. ECS (Credit): ECS (Credit) is used for affording credit to a large number of beneficiaries by
raising a single debit to an account, such as dividend, interest or salary payment.

2. ECS (Debit): ECS (Debit) is used for raising debits to a number of accounts of consumers/
account holders for crediting a particular institution.

11.6 Electronic Funds Transfer (EFT)

Electronic funds transfer or EFT refers to the computer-based systems used to perform financial
transactions electronically. 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 programmes is Direct Deposit, in which pay roll 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. For payments, funds are transferred electronically from one bank account
to the billing company's bank, usually less than a day after the scheduled payment date.

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.
The term EFT is used for a number of different concepts:
1. Cardholder-initiated transactions, where a cardholder makes use of a payment card

2. Electronic payments by businesses, including salary payments
3. Electronic check (or cheque) clearing
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 (EFTPOS), or
when the card is not present, which covers cards used for mail order, telephone order and
Internet purchases.

!
Caution Sensitive data in ATM transactions are usually encrypted with data encryption
standard (DES)

11.7 Credit Cards

Cash in the form of notes and coins makes up just one form of payment system. A major
development in banking brought i.e. through paper instruments namely cheques and credit
transfers about a second phase in payment system. The requirement for greater flexibility and
convenience and development of technology has given rise to electronic payments and this has
further given way to invent plastic cards. The credit card can be defined as "a small plastic card
that allows its holder to buy goods and services on credit and to pay at fixed intervals through
the card issuing agency".

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