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DefinitionMoving funds between different accounts in the sameor different banks, through the use of wire transfer,automatic teller machines or computers, but withoutthe use of paper documentsThe use of telecommunication networks to transferfunds from one financial institution, as bank, to

another or to withdraw funds from ones own accountto deposit in a creditors

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How does the EFT process workCustomers sign a simple authorization form thatauthorizes you to deduct the amount of their payments ona certain date Your customers provide you with a voided check to verify account information, your charges are then automatically deducted from their bank accounts each week or month onthe day they are due and deposited into your account.

Unlike most of our competitors your funds are not held for3 to 5 days since you have direct, password protectedaccess, you receive your funds within 24 hours

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Types of Electronic Funds Transfer Wire Transfer Automated Clearing House (ACH) Transactions

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Characteristics of wire transferLarge dollar amountsSingle payments

Settlement date same day as initiatedFor critical time sensitive payments(e.g debt service,funding of payroll)More expensive than ACH

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Characteristics of ACH Any size dollar amountsGenerally batch payments ( e.g payroll to large number

of payees or drafts from large numbers of remitters)Settlements date or more days after date initiatedLess expensive than wire transfers

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Advantage of EFT to a companyThe money (wages) can be transferred to the workersbank account at any time there is no need for themanager to leave the comfort of his office to performthe transactionNo delay connected with paperworkNo need for cheques or cash

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Disadvantages of EFT to a company A lot of money must be spent of security of networksHackers may monitor transactions and obtain

confidential information Very expensive to develop such types of informationsystems

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Electronic Data InterchangeEDI is the software or system used by companies toexchange information, files and documents. EDI hasreplaced the fax machine and mailing list when itcomes to information sharing, using EDI,sharing of data is much quicker and cost effective

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How does EDI workUsers place an order into the computer, then the order goesthrough an interface program. The application edits theorder and relays it to the intermediate EDI filesThe purchase order is changed to the EDI standardsformats the application can decipher. The translationprogram can function with several programs, allowing thereceivers system to interpret the order. The modem relays

the order through a value added networkThe network proceeds to take the order. From the EDIformat its changed back into the senders original formatto allow the receiver to read the document.

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Choosing an EDI systemLook for the appropriate EDI software, theseapplication have different features and the cost will vary as well.Look for an application that meets your needs andbudget, should be designed so it can be activated by asingle trading part

Automation is a necessary feature which will help toput the steps into sequence.

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Digital/Electronic Checking Also know as e-checks meaning that instead of a papercheck the customer fills out their bankinginformation(bank account number, routing number)onlineIn a more simple language an e-check is an electronic version of a paper check, it can be used in any transactions where paper checks are used-yet itcapitalizes on the speed and processing efficiencies of all electronic payments

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Cont.The endorsed check is then sent over internet to thepayees bank for deposit. Bank personnel verify signatures, credit the deposit, and then clear and settlethe endorsed e-check by sending it debited from thepayers account.The cryptographic certificates used with an e-checkenable a check payee to determine the validity of thesignatures.

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Benefits of digital Checking Works in the same way as traditional checks, thussimplifying customer education

They are well suited for clearing micro payments, theconventional cryptography of electronic checks makesthem easier to process than systems based on publickey cryptography

It can serve corporate markets. Firms can useelectronic checks to complete payments over thenetworks in a more cost-effective manner than presentalternatives

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