Electronic Funds Transfer

Electronic funds transfer (EFT) is the modern alternative to the old check-clearing process when sending and receiving funds between a payer and a payee. An EFT is done through the system of automatic clearing house (ACH). In the U.S., the Federal Reserve and the private Electronic Payments Network (EPN) are the two ACH operators, with each handling 60% and 40% of the total transactions respectively. The two terms, EFT and ACH are sometimes interchangeable both referring to the process in which funds are electronically moved via the automatic clearing house system.

Parties Involved in EFT Processing

A payer, a payee, the payer’s financial institution, the payee’s financial institution, and the ACH operator are the parties involved in order to initiate and complete an electronic funds transfer. Funds can be sent by the payer instructing his or her financial institution, or alternatively requested by the payee instructing his or her financial institution. The depository financial institution initiating a transaction instruction on behalf of a customer either to send funds or request funds (receiving funds), is called originating depository financial institution (ODFI) and the depository financial institution at the other end receiving instruction is called receiving depository financial institution (RDFI).

Credit Transaction and Debit Transaction

For a transaction instruction to go through, the instruction initiator, be it the payer or the payee as facilitated by the bank, must have first obtained the authorization from the instruction receiver, the corresponding payee or payer, to be allowed the access to the receiver’s account. Having been given the account number and the bank routing number for the receiving end, the transaction initiator sending or requesting funds can then effectively deposit funds into or take funds out of the transaction-instruction receiver’s account.

Therefore, depending on the direction of the instruction flow, when the instruction is to send funds to the instruction receiver by the payer, it is a credit transaction with funds deposited into the instruction receiver’s account, the payee‘s; when the instruction is to request funds from the instruction receiver by the payee, it is a debit transaction with funds taken out of the instruction receiver’s account, the payer’s.

Example of Credit Clearing and Settlement

Setting up a bill pay with your bank. Step1, obtain account information from your payee: a lender, the cable company, the utilities, or etc. Step 2, make and confirm a bill payment on your bank’s website. Step 3, your bank as the ODFI sends your payment instruction to the ACH operator. Step 4, the ACH operator routes the transaction to the payee’s financial institution, the RDFI. Step 5, the payee’s bank makes funds available to the payee by crediting his or her account. Step 6, the ACH operator settles the transaction between the participating financial institutions.

Example of Debit Clearing and Settlement

Making an online credit card payment on your credit card company’s website. Step 1, submit your account information to your payee. Step 2, your credit card company requests your payment through their bank. Step 3, the credit card company’s bank verifies the payment request and as the ODFI, sends the instruction to the ACH operator. Step 4, the ACH operator routes the transaction to the payer’s financial institution (your bank), the RDFI. Step 5, your bank takes funds out of your account per request. Step 6, the ACH operator settles the transaction between the participating financial institutions.

Electronic Funds Transfer or EFT is the process by which money is transferred from one location to another electronically. It is faster than traditional methods of banking, which required an individual to go to the banking facility and deposit cash or paper checks. There are many ways that funds are transferred electronically every day. Checks from employers, the government, or other organizations that are deposited directly into a consumers account is done so electronically. This helps get the money where it needs to go within minutes of the initial transaction, anywhere in the world. Whenever goods and services are paid for with a debit card, funds are electronically transferred from one account to another.

EFT has simplified the procedure for transferring money. Instead of waiting days, it takes place in seconds. In some cases a bank may slow down the process to verify funds before the transfer is completed. For individuals that telecommute as opposed to traveling to an office, their paycheck is deposited directly into their personal accounts. It removes the risk of having paychecks sent through the postal service, making payment safe and efficient. Safety precautions such as encryption, verification and password protection are necessary for this type of transfer to occur.  If money is being sent from one country to another, currency and exchange rates are automatically calculated.

For businesses, EFT provides significant savings in consumables and personnel. Invoices do not need to be printed, stuffed into stamped envelopes and sent. Payments can be collected faster and more reliably. Many ACH processors offer software and services that allow you to process checks and debit card payments online. This software can integrate with products you already have. It often has features that allow recurring transactions as well as help reduce frauds and charge backs. For consumers using debit cards at an ATM, communication is required between several transaction participants for authorizations to be sent, recognized and received.

After being routed to an acquirer, the transaction is sent through several networks to the cardholder’s account and the merchant may require additional authentication. This may include a signature or entry of a PIN number. In the last few years, the advent of EFT has transformed banking methods from slow, unwieldy processes filled with error and potential risk to a streamlined process the moves money quickly and securely from one account to another. Payroll checks, government payments and monthly recurring bills can be paid easily. Money can be transferred anywhere in the world in just a few seconds.

Electronic funds transfer is defined as any transfer of funds that occurs in a paperless manner. This includes that transactions that take place at a point of sale system in a retail store, as well as transactions that take place online, via telephone, or by fax. These payments utilize EFT processing to ensure the money is sent to the correct account quickly. This term is often used synonymously with ACH processing.  The ACH or Automated Clearing House network operates on a batch-oriented funds transfer system. It uses the Federal Reserve Bank’s network to receive and transmit files through its various associations so that payments made from one account are deposited into the intended account.

The file contains information pertinent to the transaction so that there is proper documentation of the process and confirmation that it was received. There are many ways that EFT processing can be used to improve cash flow and reduce expenses. Using the paperless method, the risk for processing checks is dramatically reduced. If the funds are verified in the account, the entire transaction can be completed with only a small charge. This is several days faster than if a paper check was used. If there are insufficient funds, the transaction is not attempted and the check is returned.

This saves money in bounced check fees as well as the personnel required to settle the account. The advantage for EFT processing for checks is that they are posted before paper checks. This means the electronic version will receive any funds in the account first, reducing the number of returned payments. Electronic payments can be submitted automatically up to three times, increasing the chance of collection in a shorter period of time than if attempted by other methods. Having payment entries automated cuts down on data entry errors, decreases the total transaction time and saves money on the personnel required for the task.

Payroll costs are reduced and the recovery of funds is achieved in a significantly short period of time. By taking advantage of EFT processing, businesses are able to collect funds faster and spend less to do so. However, it is not only on the payment side of the transaction that funds are saved. Administration expenses are drastically reduced as invoices and payment notices can be sent automatically at pre-determined timeframes. There are no invoices to be printed, envelopes to be stuffed or trips to the post office required. This helps businesses control their expenses and operate more efficiently.

It seems that everyone has a web site of their own. Home-based businesses have sites that are informative and professional. Many popular brick and mortar businesses also have an online presence. Everyone encourages you to make a purchase at their online store from the convenience of your home with their online payment processing system. In many instances they offer web-only discounts, free shipping or a gift with every purchase to entice potential customers. However, you may have some concerns about entering your credit card information.

How can you tell if they are legitimate? Is it safe to make purchases? Online payment processing is the method used for processing credit cards or electronic checks for e-commerce store purchases. Most web sites offer shopping carts that provide merchants many payment gateway choices. A payment gateway is the part of the transaction that has access to the information attached to a debit or credit card account. This information includes the account holder’s name, billing address, CV, and expiration date. It works in much the same way a point of sale system works at your favorite retail location. Payment gateways offer a variety of services to online merchants.

Though they may vary from one vendor to another, they all provide authentication for credit and debit card transactions. They are able to send and receive data over a secure connection that provides privacy for the web customers. This ensures the page used for online payment processing, which is where personal information is entered, is safe from the prying “eyes” of computer hackers. When the data is sent to the online merchant, the software creates a file in a format that can be accepted by the payment gateway. Once all data is received, the transaction commences and the request for authorization is made.

The customer’s credit card company confirms the information, validates the account and authorizes or declines the charge via their online payment processing system. If an authorization is received, the funds are removed from the customer’s account and deposited into the store’s Internet Merchant Account. Usually a confirmation or order number is created for the customer. If the charge is denied, a specific code is returned that indicates the issue. When making purchases online, look for the security seal. If it is not mentioned on the home page, check the frequently asked questions. This indicates that steps have been taken to protect the identity and banking information of customers.

NACHA has recently changed its name from The National Automated Clearing House Association to The Electronic Payments Association. Its goal is to develop methods to improve the ACH payment system. Operating rules and business practices focus on electronic payments for online bill paying, electronic checks and sales transactions completed on the Internet. It carries out many other functions in addition to being the governing force of the ACH payment system. A primary purpose is to develop new payment applications. In 2009, they discussed corporate adoption of ISO20022 within SEPA/Europe. Implementation at select customer sites will test the processes.

NACHA also introduced a solution that allows for invoice delivery, payment creation and auto-cash application integration into popular consumer and merchant accounting packages. It implements risk management tools to reduce risk and improve ACH quality. Marketing materials, public speaking engagements and advertising campaigns are intended to communicate the best use and return on investment of electronic payments. There are many advantages to direct deposits for all parties involved, and their national campaign focuses on this.  During these campaigns, the goal is to provide updates on rulings and procedures. Communication to its direct members and regional payment associations is ongoing.

NACHA issues and concerns are addressed using many venues, from workshops and conferences to journal and periodical articles.  To become a member of the ACH network, a business must meet all of their processing requirements and certifications. There are several levels of membership.  Becoming part of the industry councils and programs provides the opportunity to sponsor business to business billing and payment programs, network with industry experts and participate in global payment forums. Direct members affect the business and legal structure of products and services offered by the ACH. They are actively involved in the voting process that affects the ACH operating rules and standards.

The NACHA members that are regional payment associations are predominantly non-profit trade associations. Their members include commercial banks, savings and loans or credit unions. To become a direct member of the Electronic Payments Association, the business must already be a member of one of the regional associations. Electronic payments are becoming the preferred payment method by merchants and consumers alike. Affiliate members have access to the latest developments and they receive the materials and information directly from the Electronic Payments Association. Contact National Processing for more information on how they can best serve all of your electronic payment needs.

For more information please contact us at www.nationalprocesssing.com or call us at 877-458-3323

An Electronic Fund Transfer is a paperless monetary transaction occurring between two banks.  In the case of online sales, the customer’s checking account information is input onto a webpage.  The customer’s bank then routes and deposits the funds into your account.  There are, of course, many more intermediary steps that occur.  However, most of these steps happen in a matter of seconds and do not require any action on your part.

There are many benefits to both the customer and business owner when using an electronic fund transfer, or EFT.  One of the main reasons to use an EFT is time savings, which are two-fold.  The first being that the funds are deducted much more quickly than when using a traditional check as they do not need to go through the mail.  This means that money is deposited into your bank account that much faster.  The second way that an EFT saves time is by cutting down on the amount of time spent on bookkeeping and keeping up on past-due invoices.

The time and energy savings associated with an electronic fund transfer are also passed onto the customer as they have a decreased lag time between writing their check and the withdrawal being deducted from their account.  This keeps their checking accounts up to date and organized.  It is also much simpler for a customer to click a button or two online rather than getting out the checkbook, finding an envelope and stamp, and heading out to the post office.  Cutting down on the customer’s effort even more, automatic reminder e-mails and payments can be set-up.  This makes customers more likely to pay on time, allowing the payment to get to you faster and reducing the amount of time you spend chasing down past-due checks.

EFTs can streamline payment by enabling automatic payments which can be applied to either fixed or variable amounts.  By setting up an automatic payment, a client is no longer required to remember when they have to pay a bill and risk it being late.  Funds set up to be deducted from the customer’s account on a specified date gets payment to you quickly, eliminates virtually any chance for delayed payment.  You then no longer have to waste your time with past-due invoices and phone calls and your clients do not have to worry about incurring any late-charges.  By having the ability to offer your clients the option of an electronic fund transfer, you are simplifying the lives of both you and your customer and getting paid in the process.

Online payment processing is one of the major considerations that you need to look into if you are planning to open an online store or website. Believe it or not, there are some entrepreneurs who get caught up with web design and programming requirements to open an Internet-based shop such that they end up forgetting about how they will process payment by customers. Come to think of it, if you do not have any electronic or online payment processing program in your website, you might as well close your site and shelve your dream of becoming the next big entrepreneur. Before you panic and get the first payment processor that you see on the Internet, it is a good idea to brush up on payment processing networks. Read on.

The first thing that you should know is that not all networks that process electronic payments are the same. Each payment processing option has its own terms, conditions and limitations. You need to read about the terms of service of each available option before you sign up. Some of the things that you might want to ask the service provider include how many accounts you can open. Remember that if you do not follow the rules and regulations of the network that you are going to use, there is a huge chance that your account will be banned or shutdown. You do not want this to happen to your business at all cost.

You should also realize that there are some payment processing systems that are not available in certain areas. This is all right if your niche market is geographically specific. But it may be wise to check what networks are available to you before you spend time designing your website and spending tons of money in opening up an online store. If you live in the US, you really do not have to worry much about this because most if not all electronic payment networks are available in the country.

Lastly, it is also a wise idea for you to look at the technical side of payment processing before you consider using it. This is important so that you fully understand how to properly set up payment processing systems on your online store or website. You also need to know what you have to do when problems arise. This will help you avoid being caught off guard. A solid and reliable payment processing system can help determine the success or failure of your business.

EFT is one of the things that you will encounter when you are looking for electronic financial transactions. In simple terms, EFT or electronic fund transfer refers to the transfer of money from one account to another with the use of secured codes and electrical signals. Since the world is interconnected on the Internet, it would be easier for someone in North Carolina to transfer money to the account of a company in New York. Aside from using this system in paying your purchases in an online store, it is also useful in sending money to the account of your children, paying taxes, and making personal financial transactions on the Web. By the way, EFT also includes money transfers among the different banks and financial institutions all across the globe.

Since EFT is fast and easy, it can be used by unscrupulous individuals and fraudulent groups to launder money. In order to protect the integrity and security of this new payment method, the Federal Reserve supervises the transfer of funds among banks and financial institutions in the United States. Money that is wired to and from other countries must abide by the rules of the Federal Reserve. It is worth noting that there are guidelines and maximum amounts that are allowed to be transferred for a particular period of time. Again, such safety measures are in place to protect your security as well as to ensure that illegal elements will not use banks and financial organizations in the United States.

You should realize that EFT is not only beneficial to businesses. Individuals can also enjoy a lot of benefits using this payment system. Not only will you be able to save time in paying your bills and even your taxes with the help of EFT, but you can also use it to pay recurring bills. By the way, this is also more cost-effective than paying with paper checks. Remember that check books are not free. You have to pay by the booklet. If you use up your paper checks for your bills each month, you will end up spending a lot of money just buying check booklets.

It is worth stressing that EFT development and trends are governed by the law on Electronic Fund Transfer System. This provides a series of guidelines and clauses that have to do with all electronic transactions and clearances. To ensure that you get the best EFT systems, use only companies that offer tried and tested programs. In the end, having this payment system can greatly boost your business.

What to Do Before Hiring a Check Processing Services Company

With check processing services and other electronic payment systems, it becomes easier for businesses to manage payments from their customers. Before the age of computers and the Internet, companies need to collect paper checks as well as physically deposit such checks in banks. Not only is this old system a hassle, but it is also a slow way of crediting payment from your clients. Besides, if you have an online business, it would really take a long period of time before the check that your buyer used to pay you can be cleared and deposited to your account. If you want faster transactions and clearance of checks, then you should seriously consider using a check processing services company. But before you do, here are some of the things you should do before hiring check processing services provider.

If there is one thing that you should know, it is the fact that there are numerous companies that provide check processing services. Thus, before you sign up with one company, you should do your research well. Know what their service is all about and try to learn what the new developments in the field of electronic processing of checks are. How will you be able to determine if you are getting a good or a bad deal if you do not know anything about electronic check processing services?

Every business owner who plans on accepting payments via checks should also familiarize himself with the equipment, software, telephone technology and other things that may be needed. This is vital to help ensure smooth transactions and help you avoid fumbling when you are already using such tools. You do not want to shy away from customers simply because you were not able to learn how to use the equipment and tools that go with your check processing services.

Once you have already studied and mastered everything about check processing services, you can go search for the company that will provide you with such services. Remember to check the integrity and credibility of the company that you are going to get. Furthermore, be sure that the check processing services company that you will hire will provide utmost security for the electronic transactions of your company. You want to be sure that you will be given a software that will carefully check the checks that are being processed (to prevent fraud) and ensure that your payment system is secure from hacking and other illegal online activities.

Please contact www.nationalprocessing.com for more information.