Electronic funds transfer or EFT refers to the
computer-based systems used to perform financial transactions electronically. The term
is used for a number of different concepts:
EFTPOS (short for Electronic Funds Transfer at
Point of
Sale) is an Australian and New
Zealand electronic processing system for credit
cards, debit cards and charge cards.[1]
European banks and card companies also sometimes reference "EFTPOS" as
the system used for processing card transactions through terminals on
points of sale, though the system is not the trademarked Australian/New
Zealand variant.
EFT may be initiated by a cardholder when a payment card such
as a credit card or debit card is used.
This may take place at an automated teller
machine (ATM) or point of sale
(POS), or when the card is not present, which covers cards used for mail
order, telephone order and internet purchases.
Card-based EFT transactions are often covered by the ISO
8583 standard.
[edit] Transaction
types
A number of transaction types may be performed, including the
following:
- Sale: where the cardholder pays for goods or service
- Refund: where a merchant refunds an earlier payment made by a
cardholder
- Withdrawal: the cardholder withdraws funds from their
account, e.g. from an ATM. The term Cash Advance may also be
used, typically when the funds are advanced by a merchant rather than at
an ATM
- Deposit: where a cardholder deposits funds to their own
account (typically at an ATM)
- Cashback: where a cardholder withdraws funds from their own
account at the same time as making a purchase
- Inter-account transfer: transferring funds between linked
accounts belonging to the same cardholder
- Payment: transferring funds to a third party account
- Enquiry: a transaction without financial impact, for instance
balance enquiry, available funds enquiry, linked accounts enquiry, or
request for a statement of recent transactions on the account
- E top-up: where a cardholder can use a device (typically POS
or ATM) to add funds (top-up) their pre-pay mobile phone
- Mini-statement: where a cardholder uses a device (typically
an ATM) to obtain details of recent transactions on their account
- Administrative: this covers a variety of non-financial
transactions including PIN change
The transaction types offered depend on the terminal. An ATM would
offer different transactions from a POS terminal, for instance.
[edit] Authorisation
EFT transactions require communication between a number of parties.
When a card is used at a merchant or ATM, the transaction is first routed
to an acquirer, then through a number of networks to
the issuer where the
cardholder's account is held.
A transaction may be authorised offline by any of these entities
through a stand-in agreement. Stand-in authorisation may be used when a
communication link is not available, or simply to save communication cost
or time. Stand-in is subject to the transaction amount being below agreed
limits, known as floor limits. These limits are calculated based on the
risk of authorising a transaction offline, and thus vary between merchants
and card types. Offline transactions may be subject to other security
checks such as checking the card number against a 'hotcard' (stolen card)
list, velocity checks (limiting the number of offline transactions allowed
by a cardholder) and random online authorisation.
Before online authorisation was standard practice and credit cards were
processed using manual vouchers, each merchant would agree a limit ("floor
limit) with his bank above which he must telephone for an authorisation
code. If this was not carried out and the transaction subsequently was
refused by the issuer ("bounced"), the merchant would not be
entitled to a refund.
[edit] Dual Message
Authorisation/Clearing
Depending on the business rules of the issuer, a "hold" may be placed on the funds
authorised. This hold reserves that amount of money for a defined period.
If a transaction is not cleared
within the defined period then the "hold" will be removed and the funds
made available again.
Example - Purchase for £10 on Day 2 never completes so hold removed
on Day
4