OVERVIEW

EFTS functions similar to a debit card system: It operates as though the loaning library is the retailer, the borrowing library is the consumer, and EFTS is the clearinghouse service that enables the financial aspects of the transaction. Participants enroll in EFTS by placing funds on account at UCHC to cover the costs of their transactions. A fundamental principle of the system is that the reciprocal of a loan is a borrow. Consequently, only lending libraries that wish to collect for their service need to file billing information with EFTS. About 20% of the participants submit files. The rest of the participants monitor their account balances and submit additional funds when necessary. The files are processed as they are submitted, with lenders' accounts credited and the corresponding borrowers' accounts debited. The lender pays a fee based on the amount collected on their behalf.

Electronic funds transferFrom Wikipedia, the free encyclopedia

BankingA series on financial services

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Electronic funds transfer (EFT) is the electronic exchange, transfer of money from one account to another, either within

a single financial institution or across multiple institutions, through computer-based systems.

The term covers a number of different concepts:

Cardholder-initiated transactions, using a payment card such as a credit or debit card

Direct deposit payment initiated by the payer

Direct debit payments, sometimes called electronic checks, for which a business debits the consumer's bank

accounts for payment for goods or services

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

Electronic Benefit Transfer

"EFT" means Electronic Funds Transfer.

(f) "EFT Centre" means any office designated by the Nodal Department in each of

the centres to which EFT system is extended, for receiving, processing and sending the

EFT data file and the debiting and crediting of accounts of the participating banks and

institutions for settlement of payment obligations or one or more of these functions. EFT

Centre is referred to as "Sending EFT Centre" when it receives EFT data file from the

participating sending banks and institutions. EFT Centre is referred to as “Receiving

EFT Centre” when it receives EFT data file from a sending EFT center.

(g) "EFT Data File" means an electronic data file of a batch of payment orders for

funds transfers, processed and consolidated in the manner specified for transmission of

consolidated payment orders and communications concerning payment orders from

EFT service branch to the EFT centre. Similar data files between EFT Centres shall be

referred to as "RBI Data File". The processed file to be transmitted by the EFT Centre to

the service branches shall be referred to as "NCC Data File".

(h) "EFT" Service Branch" means an office or branch of a bank or institution in a

centre designated by that bank or institution to be responsible for processing, sending

or receiving EFT data file of that bank or institution in that Centre and to do all other

functions entrusted to an EFT service branch by or under these Regulations. EFT

Service Branch is referred to as "Sending EFT Service Branch" when it originates an

EFT Data File for Funds Transfer. EFT Service Branch is referred to as "Receiving EFT

Service Branch" when it receives EFT Data File from Receiving EFT Centre.

(i) "EFT" System" means the Electronic Funds Transfer System established by

these Regulations for carrying out inter bank and intra-bank funds transfers within India, through EFT centres connected by a network, and providing for settlement of

payment obligations arising out of such funds transfers, between participating banks or

institutions.

(j) "Execution" of a payment order in relation to a sending bank means the

transmission or sending of the payment order by it to the EFT Service Branch; in

relation to a Service branch it means transmission of the consolidated payment order in

the encrypted EFT data file to the sending EFT center; in relation to the sending EFT

Centre it means the transmission of the payment orders to the receiving EFT Centre; in

relation to the receiving EFT Centre, it means the transmission of the payment order to

the receiving EFT Service Branch and in relation to the beneficiary's bank, it means the

crediting the beneficiary's account.

(k) "Funds Transfer" means the series of transactions beginning with the issue of

originator's payment order to the sending bank and completed by acceptance of

payment order by the beneficiary's bank for the purpose of making payment to the

beneficiary of the order.

(l) "Institution" means a public financial institution and includes a department or

agency of the Central or State Government or any other organization approved by the

Reserve Bank as eligible to open a settlement account with it.

(m) "Nodal Department" means the Department of Payment and Settlement Systems

of Reserve Bank which is responsible for implementation, administration and

supervision of the EFT System.

(n) "Notified" means communicated electronically or in writing.

(o) "Originator" means the person who issues a payment order to the sending bank.

(p) "Participating Bank or Institution" means a bank or as the case may be an

institution admitted for participating into the EFT System pursuant to Paragraph 3 of

these Guidelines and whose Letter of Admission has not been cancelled .(q) "Payment Order" means an unconditional instruction issued by an originator in

writing or transmitted electronically to a sending bank to effect a funds transfer for a

certain sum of money expressed in Indian rupees, to the designated account of a

designated beneficiary by debiting correspondingly an account of the originator.What It Is:

An electronic funds transfer (EFT) is a transaction that takes place over a computerized network, either among accounts at the same bank or to different accounts at separate financial institutions. The Electronic Fund Transfer System (EFTS) is an electronic bill-payment system created at the University of Connecticut Health Center (UCHC) in Farmington. The program was developed and implemented on a regional basis in 1996 to replace a prepaid coupon system utilized by DOCLINE libraries. Health sciences libraries use EFTS for payment of interlibrary loan (ILL) transactions. Centralized electronic billing of participants greatly reduces the need to create invoices and to write reimbursement checks for ILLs and document delivery among participants.

How It Works/Example:

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.

Why It Matters:

The increased use of EFTs for online bill payments, purchases and pay processes is leading to a paper-free banking system, where a large number of invoices and payments take place over digital networks. EFT systems play a large role in this future, with fast, secure transactions guaranteeing a seamless transfer of funds within institutions or across banking networks.

EFT transactions, also known as an online transaction or PIN-debit transaction, also offer an alternative to signature debit transactions, which take place through one of the major credit card processing systems, such as Visa, MasterCard or Discover, and can cost as much as 3% of the total purchase price. EFT processing, on the other hand, only charges an average of 1% for debit card transactions.

OPERATIONS

The primary benefit for EFTS participants is the simplification of and reduction in expenses associated with payments for ILL charges compared to direct invoicing. Additionally, EFTS encourages resource sharing by reducing uncertainty about billing when a library considers an ILL transaction with an unfamiliar library. Unfamiliarity often results from geographical location. As a clearinghouse for bill payment, EFTS increases each library's ILL options by allowing the library staff member to focus on item availability and service considerations and not on receipt of payment.

EFTS is an individual transaction billing system; it allows the loaning library to charge whatever it chooses for each transaction. Lending libraries can submit files in a variety of ways. An ASCII-based text file can be generated by such third-party ILL management programs as QuickDOC, Clio, and ILLiad. For lenders who do not use such programs, a small program can be downloaded from the EFTS Website* that will assist in creating the transaction file.

A 3% service fee is currently deducted from the lender for each transaction to cover EFTS operational costs. This fee is analogous to the bank charge a retailer pays for debit card account management.

EFTS participants are now in all eight National Network of Libraries of Medicine (NN/LM) regions, including 48 of the 50 states (Figure 1). EFTS was implemented on a regional basis by the New England (1996), Mid-Atlantic (1998), and South Central (1999) Regions. This implementation resulted in an immediately recognized billing standard for those regions. The EFTS Website contains instructions for joining, policies, and procedures as well as a current participants list.

Figure 1

Electronic Fund Transfer System (EFTS) participants (April 2004)

Looking at 2004 first-quarter data, 85% of the members saw account activity, with 1% of them strictly lending, 70% strictly borrowing, and 29% both lending and borrowing. EFTS has become a substantial benefit to those net loaning libraries in that they maintain a positive cash flow because of EFTS. Those libraries whose lending exceeds their borrowing can elect to receive a check—issued quarterly in January, April, July, and October—from EFTS drawn on their account for the difference between their account balance and the minimum needed to cover their own borrowing activity. The first quarter of 2004 saw 50 libraries receiving a total of $495,000 in redistributions. The regularity of quarterly payments allows for accurate income projection and forecasting compared with the irregularity associated with the collection process when paper bills are sent to multiple potential payers.

A primary strategic goal for EFTS has been to meet the needs of the NN/LM DOCLINE community. Table 1 indicates a current snapshot of this relationship.

Table 1 Electronic Fund Transfer System participants by region

Regions 1, 5, and 8, where EFTS has been in use the longest, have an average 69% EFTS participation rate for active DOCLINE libraries. Were this percentage applied to the total number of active DOCLINE libraries in the United States (2,899), the potential domestic growth for EFTS is 2,000 institutions or more than double the current level of participation.

EFTS has an Advisory Committee that meets via telephone conferencing to review program policies and procedures. Each region of NN/LM is represented with a hospital librarian, a medical school librarian, and the regional network development coordinator. The Advisory Committee roster is on the EFTS Website.

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COMPOSITION

NN/LM consists of libraries of various types and functions. A library can be classified as academic, hospital, or other and function as a Regional Medical Library, Resource Library, Primary Access Library, or other. Participation in EFTS spans all of these areas. Figure 2 indicates EFTS participation by type.

Figure 2

EFTS participation by type

Ammon Ripple from the Children's Hospital of Pittsburgh told EFTS, “We fill 150–250 DOCLINE requests every day. Using EFTS in tandem with QuickDOC helps us take care of most of our billing in just 15 minutes a month instead of the many, many hours it used to take to process all those checks and invoices!! EFTS not only saves us time and money, but helps us provide better service to our ILL customers.”

Even smaller libraries have found EFTS beneficial, as Pat Davis from Falmouth Hospital, Massachusetts, indicated, “I am the only person in a small hospital library, so I truly appreciate the ease and convenience of using EFTS over paying individual invoices from libraries who charge for ILLs.”

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DEVELOPMENTS

In August 2002, the National Library of Medicine awarded UCHC a 36-month contract to implement EFTS on a national basis. During the first year, the EFTS staff actively promoted EFTS by attending regional meetings, obtaining the support of network coordinators at each of the 8 Regional Medical Libraries, updating EFTS resources, establishing the EFTS-L email discussion list, and preparing for development of a Web-based system upgrade.

During the second year, the National Library of Medicine became an EFTS participant. Ralph Arcari and Edward Donnald were awarded the Thomson Scientific/Frank Bradway Rogers Information Advancement Award at MLA '03 in San Diego, California, for their work with EFTS. The Web-based EFTS was rolled out in January 2004. Participants were assigned secure online accounts, where they could check their account balances, make deposits, monitor transactions, and upload billing files at their convenience.

Financial self-sufficiency is the strategic objective for EFTS. The National Library of Medicine is committed to supporting EFTS until this objective is met. The goal for EFTS now is to maintain the extremely reasonable service fee for the services provided in the interest of increasing EFTS participation. If readers have any questions or would like to discuss EFTS participation, they may contact the office.

What are the two BASIC TYPES OF ELECTRONIC FUNDS TRANSFER (EFT) TRANSACTIONS?

EFT is a generic term for which there are two basic EFT transaction types: Wire transfers

Automated Clearing House (ACH) transactions

the two basic types of wire transfers?

Fed wire - Between two banks (requires FRB to facilitate)

Book transfer - Within same bank (does not require FRB)

Wire Transfer

Wire transfer or credit transfer is a method of electronic funds transfer from one person or institution to another. A wire transfer can be made from one bank account to another bank account or through a transfer of cash at a cash office, such as Western Union

characteristics of wire transfers?

Large dollar amounts

Single payments

Settlement date same day as initiated

For critical time-sensitive payments (e.g., debt service, funding of payroll)

More expensive than ACH ($6 - $20)

ACH (Automated Clearing House)

The Payflow ACH (Automated Clearing House) Payment Service enables you to electronically collect payments from your customers for either single-entry or recurring payments by directly debiting your customer's checking or saving accounts.

The most common uses of ACH are online bill payment, mortgage and loan repayment, and direct deposit of payroll. ACH payments are an efficient and cost-reducing alternative to paper checks and credit cards.

On the Internet, ACH is primarily used for person-to-person (P2P), business-to-customer (B2C), and business-to-business (B2B) payments.

two types of ACH transactions?

ACH credits - Direct deposits (initiated by the sender)

ACH debits - Electronic drafts (initiated by either the receiver or sender)

characteristics of ACH transactions?

Any size dollar amounts

Generally batch payments (e.g., payroll to large number of payees, or drafts from large number of remitters)

Settlement date one or more days after date initiated

Less expensive than wire transfers (less than $.01 under the State's MSA)

Benefits of Electronic Fund Transfer

► Recipient Benefits

- Provides convenience

- Provides a highly dependable, efficient payment system

- Eliminates lost, forged, or stolen checks.

- increases security

- Provides payment information to the vendor/recipient

- provides the vendor/recipient with funds on the payment date.

► Agency Benefits

- eliminates check ordering, storage, and printing costs.

- eliminates postage costs

- provides complete audit trail

- reduces paper work

► Fully traceable payments

► Lower Government operating costs through reduced manual payment processing and streamlined operations

► International Direct Deposit (IDD)-EFT service for foreign-resident payment recipients-IDD enables Federal payments to go directly to the recipients’ accounts at financial institutions through a link between the Fed Reserve Bank and electronic payment systems in foreign countries-Recipients benefits by having their payments automatically converted to local currencies at the lowest exchange rate obtainable, thereby eliminating bank and check-cashing fees.-IDD also eliminates the possibility of lost or delayed mail and assures receipt of payment on the payment date.

► Electronic Transfer Account (ETA- An account designed by the Treasury to ensure that individuals who want to receive Federal payments electronically have access to an account at a reasonable cost and with the same consumer protections available to other account holders at the same financial institution.