ISSUES CONCERNING ELECTRONIC FUNDS TRANSFER: AN ANALYSIS

Abstract

Electronic fund transfer is a new technology, developing faster and improved payment systems; India's banking sector has been aiming to provide better services to its customers. To provide a well-designed, strong, and transparent financial infrastructure underpinned by efficient payment and settlement systems, banks utilize novel computerization and communication methods. Electronic Funds Transfer (EFT) also has the potential for major security issues, such as websites hanging, necessitating financial institutions to take extra safeguards when using the Automated Clearing House (ACH).

Because of direct client participation in the dynamics of the systems, EFT systems have several points of access where transactions can be influenced in unlawful ways. How data is gathered and transported among the sites and institutions, as well as the utilization of telecommunication connections. Cardholder–initiated the transaction, using a payment card such as a credit or debit card. Wire transfer via international banking networks such as SWIFT. Electronic bill payments in online banking, are delivered by EFT or paper check.

To maintain safe and sound business practices, customers are protected against losses resulting from inadequate remedies available to them. Due to insecurity created by electronic funds transfer, it the importance to analyze measures that can effectively prevent insecurity. Despite the importance of these systems, many financial institutions fail to understand the potential credit risk and fraud related to ACH services. Credit risk and fraud are a particular concern during weak economic periods, bankruptcies, and business failures. The purposes of this article are to address the issues of EFT risks and to suggest measures to reduce exposure to such risks.