Unit-III

Electronic Fund Transfer

Part-4 Part-4
Electronic Fund Transfer
It is a computer based system that facilitates
the transfer of money or processing financial
transactions between two financial
institutions the same day or overnight. institutions the same day or overnight.
Two Types of EFT Two Types of EFT
EFT
Wire Transfer ACH
EFT is a generic term
Describing two
different methods of
transferring funds
electronically electronically
Common mistake to call an ACH payment a wire transfer
Each are handled by different departments at a bank
Both performed through Federal
Reserve Bank System
(Except for in-bank or on-us transactions)
Wire Transfer Wire Transfer
Movement of funds is real time effected immediately
FRB open for fed wires up to 6:00 p.m.
Wire Transfer
Fed Wire Book Transfer Foreign Wire
Between two banks Within same bank Foreign bank
FRB open for fed wires up to 6:00 p.m.
Book Transfers are memo posted up until midnight
ZBA (Zero Balance Account) sweeps are book transfers
Fed Wire Affects banks Reserve Accounts maintained at the FRB
Sending banks account at the FRB gets debited
Receiving banks account at the FRB gets credited
Foreign exchange and Euro dollars through Clearing House for Inter-bank
Payments System (CHIPS) 54 New York Banks
Wire Transfer Utilization Wire Transfer Utilization
When appropriate to use
Time sensitive - Funds need to be moved same day
initiated
Large dollar amounts
Examples Examples
Debt Service Payments (preserve States credit rating)
Funding ACH payments (e.g. payroll direct deposit)
Funding investments (e.g., at custodian bank)
Adjusting balances (between depository banks)
Remitting ESC payments (to US Treasury)
DOR accepts wire transfers from corporate taxpayers on an
exception basis only
Initiating Wire Transfers Initiating Wire Transfers
Banks provide corporate customers ability to initiate their own
wires via online banking access
Templates are used
Repetitive Transfers Pre-established ABA# and acct.#
Non-Repetitive - Open wire to anywhere Non-Repetitive - Open wire to anywhere
State Treasurer initiates all wire transfers for agencies
Via Wachovia Connection and BOA Direct
As requested by agencies via Core Banking System
Results in debit to agencys disbursing / STIF acct.
DSTs Bank Payees Bank Online Wire System Disb. Acct.
at DST Agency Logs in
ACH ACH
ACH
ACH Credits ACH Debits
Direct Deposit.
Two types of ACH (Automated Clearing House)
ACH Network A batch-process, store and forward for future settlement
Direct Deposit.
Debit Card Account
Direct Deposits
Always initiated by sender
Senders account is debited and
receivers account is credited
Receivers Acct
Bank account
Debit card account
Electronic Drafts
Initiated by sender or receiver
If by sender Sender authorizes a third
party to initiate transaction
If by receiver Receiver initiates
transaction
Also referred to as Direct Payments
ACH Utilization ACH Utilization
When appropriate to use
Large number of payments in a single file (batch)
At least one day is available between initiation and settlement
Any size dollar amounts
Examples Examples
Outbound Payroll direct deposit to bank account (ACH credits)
Outbound Payroll direct deposit to debit card account (ACH credits)
Outbound Vendor payments (ACH credits)
Inbound Taxpayer payments (ACH credits or debits)
ACH Transactions can have AddendumRecords
Remittance data attached
Can be interfaced with A/R system
DOR requires taxpayers to use TXP format
ACH Players ACH Players
ACH Operator
(FRB)
Originating
Depository
Receiving
Depository
2
3
Trade Group
Governing Org.
(FRB) Depository
Financial
Institution
(ODFI)
Depository
Financial
Institution
(RDFI)
Originator
(Company /
Employer)
Receiver
(Company /
Employee)
Authorization / Enrollment
1
4
Electronic Checks Electronic Checks
Electronic Checks
Online Paper Check ACH Conversions
Loosely used term Refers to two different methods
Online Paper Check
Developed by Financial Services Technology Consortium(FSTC) Not-for- Developed by Financial Services Technology Consortium(FSTC) Not-for-
profit groupof CA banks
InitiatedusingaPIN anddigital signature
Receiver printsout paper checkfor deposit
ACH Conversions (most common method referred to)
Transactions converted to ACH debits (e.g., ARC, POP, WEB, TEL)
Services can be provided by third party processors
Account verification determined upfront. Guarantees available.
Examples of services provided through third-party CyberSource (POP)
Telecheck:
CheckFree:
AmeriNet:
Paymentech:
Applies to consumer checks
only, not business checks.