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Electronic Fund Transfer
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles
J Woelfel
(We recommend this as work of authority.)
As defined in
the ELECTRONIC FUND TRANSFER ACT, any transfer of funds, other than a
transaction that is originated by a paper instrument, that is initiated
through an electronic terminal, telephone, or computer or magnetic tape
and that orders or authorizes a financial institution to debit or credit
an account.
Specifically mentioned
in the act are the following:
1.
POS (point-of-sale) transfers.
2.
Automated teller transactions.
3.
Direct deposits electronically of funds, such as deposits of
Social Security or
salary payments, or payments made electronically
from an account, such as for
insurance premiums, agreed to by insurance
companies.
4.
Transfers for the purchase or sale of securities.
5.
Transfers by telephone not made pursuant to prearranged plan.
Such types of
transactions as the preceding, however, would be included in any broad
definition of electronic fund transfers, which comprehensively would include
all types of transfers and data processing effected by means of electronic
equipment and systems, involving both internal transactions within an
institution or firm and external transactions with other institutions
or firms.
Commercial debits,
which arise when an originator firm uses an AUTOMATED CLEARINGHOUSE unit
in the automated clearinghouse electronic clearing and settlement system
to collect the payments, include consumer payments, include consumer payments
(such as insurance premiums, mortgages, and utilities) and corporate payments
(such as accounts receivable and cash concentration). Commercial credits, which arise when the originator firm uses
an automated clearinghouse to make payments, include corporate payments
to consumers (such as payroll payments, dividends, and annuities) and
corporate payments to other firms (such as accounts payable and payments
to credit card merchants).
Included in any
comprehensive definition of electronic fund transfers, therefore, would
be the following facilities:
1.
Fedwire, the Federal Reserve communications system.
This is an electronic
communications network connecting Federal Reserve
offices, the board,
member banks, the Treasury, and other government
agencies. Fedwire is used
for transferring member bank reserve account
balances and government
securities, as well as for transmission of
Federal Reserve administrative,
supervisory, and monetary policy information.
See FEDERAL RESERVE COMMUNICATIONS SYSTEM
FOR THE
EIGHTIES.
2.
Culpeper switch, a computerized Federal Reserve facility located
in Culpeper,
Virginia, which serves as a central relay point
for messages transmitted
electronically between Federal Reserve districts
on the Fedwire. Messages
moving billions of dollars of funds and securities
daily are processed by
Culpeper in electronically coded form.
They originate in commercial banks, are
sent to Reserve banks, and then are transmited
to Culpeper, where they are
switched to other Federal Reserve banks and
in turn to other commercial
banks.
3.
BANKWIRE, an electronic communications network similar to Fedwire,
but
owned by an association of banks and used to
transfer messages between
subscribing banks.
Consumer convenience
in retail banking is facilitated by such types of electronic equipment
as the following:
1.
POS (point-of-sale) systems, which allow for transfer of funds
between
accounts, authorization for credit, verification
of checks, and provision of related
services at the time of purchases.
POS terminals are located in shopping
areas and allow customers of participating
financial institutions to effect
transactions through the use of machine-readable
debit cards.
2.
ATM (automated teller machines), which are computer-controlled
terminals
located on bank premises or elsewhere, through
which customers of financial
institutions may make deposits, withdrawals,
or other transactions as they would
through a bank teller.
Summary
For the future,
additional volume is projected for both consumer and commercial electronic
banking, including expansion in volume of the automated clearinghouse
system. In the words of the
Senate Banking Committee, "this new generation of financial services offers
the public significant new choices in personal banking and has the potential
to be of great benefit to consumers."
BIBLIOGRAPHY
Bank Automation
Newsletter. Warren, Gorham
and Lamont, Inc., Boston, MA. Monthly.
Bank Systems
& Equipment. Gralla
Publications, New York, NY. Monthly.
EFT Press Alert.
Warren, Gorham & Lamont, Inc. Boston, MA.
Monthly.
Corporate EFT
Report. Biweekly.
The Smart Card.
Business Communications, Norwalk, CT, 1986.
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