What is electronic funds transfer (EFT) processing?

EBT, or electronic funds transfer, is a computerized system that performs financial transactions electronically without any paper money being sent from one bank to another. The use of electronic funds transfer has become more widespread with the personal computers, improved networking systems, and security features such as encryption. EFT processing is the process of transferring funds initiated by electronic means including ATMs, computers, telephones, point of sale systems, and other electronic terminals. Electronic finds transfers may also be referred to as automatic bill payment, automatic debit, electronic bill payment, or direct debit/deposit. Most users of EBT processing find it safe, efficient, and less expensive than using traditional paper checks. In fact, many institutions such as banks offer lower interest rates on loans or free services if customers use ACH/EFT processing.

What type of transactions can be handled by EBT payments?

EBT payments can be used for both debit and credit transactions. The following transactions can be executed by electronic funds transfer: sale, withdrawal, refund, cash back, deposit, payment, and inquiry. According to NACHA, 43 percent of all U.S. households use ACH/EFT payments for at least one recurring payment per month. In addition, 84 percent of ACH/EFT payment users say they are very satisfied with using EBT/ACH.

How are EBT or electronic payment services transactions authorized?

There are many security protocols in place to ensure that electronic payment services are secure. An electronic funds transfer goes through several security procedures throughout its transfer through the network ensuring that the whole process is legitimate and legal. Card holders typically are required to provide their signature as a form of authentication, and sometimes a personal identification number (PIN) may be used. Other means of authentication involve using a credit card stripe reader to read the card's magnetic data. Data is sent to be authorized using encryption to maintain the integrity of the inquiry for electronic payment services. For transactions where a network connection is not available, electronic payment services can be authorized offline. There may be higher rates involved, since the security risks are greater. Some security measures taken include checking to make sure the card number is not on a list of “hot cards,” which is a list of known stolen credit cards, limiting the number of offline transactions, and random online authorization.

Reference: http://www.ebtprocessing.com/