Electronic Funds Transfer (EFT)

As defined in the Electronic Fund Transfer Act (Title XX of the Financial Institutions Regulatory and Interest Rate Control Act of 1978), any transfer of funds, other than a transaction 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. An example would be an Atm (Automatic Teller Machine) transaction. Also called wire transfer.

Transfer of funds between accounts by electronic means rather than conventional paper-based payment methods, such as Check writing. As defined by the Electronic Fund Transfer Act of 1978, an electronic funds transfer is any financial transaction originating from a telephone, electronic terminal, computer, or magnetic tape.

There are two categories of EFT systems:

1. Large dollar Wire Transfer systems such as Fed Wire, the Federal Reserve communication system linking Federal Reserve Banks, member banks, and the Treasury; and the Clearing House Interbank Payment System (CHIPS), a private wire network that handles most of the U.S. Dollar volume in foreign trade.

2. Consumer electronic payment systems, including Automated Teller Machine networks, retail merchant Point-Of-Sale (POS) debit card systems, and telephone bill payment systems. See also Electronic Data Interchange; Internet Banking.