electronic fund transfer

1. What is an EFT payment?
 An electronic funds transfer (EFT), or direct deposit, is a digital movement of money from
one bank account to another.
 These transfers take place independently from bank employees. As a digital transaction,
there is no need for paper documents.
 EFT has become a predominant method of money transfer since it is a simple, accessible,
and direct method of payment or transfer of funds.

2. Types of EFT Payments
Electronic Checks
In this payment, a digital check is generated upon the payer’s authorization. E-checks are
commonly used for vendor payments.
Direct Deposit
 With direct deposit, funds are automatically deposited into an account with little to no
paperwork.
 This method is popular among employees.
 While the automatic deposit requires almost no work on a regular basis, the deposit needs to
be set up, and this requires bank account information for the recipient, among other potential
information for entry.

3. Phone Payments
 This is a casual transaction, and it occurs during a phone call. Usually the payee will supply
their information, typically a card number, to the recipient over the phone.
 The transaction will happen on the recipient’s line.
 The payee does very little after verbal authorization.
 This is common for utility payments.
ATM Transactions
A global convenience, ATM transactions occur at electronic kiosks found throughout cities and
banks all over the world.

4. Card Transactions
During the point of sale phase of a transaction, a credit card or debit card is the most
commonly used form of payment around the world, replacing cash.
This can be in person or online, and entails the swipe, dip, or entry of a card, during which
account information is electronically received and a payment withdrawal is approved, then the
payment is scheduled and processed within a day or two.
Internet Transactions
The internet version of tapping, swiping, or inserting a card involves manual entry into a point
of sale field, followed by clicking a payment button.
This process does the same as the above, processing an approval for payment, and then
transferring funds for payment within a couple days.

5. Digital Token-based payment system
 The digital token-based payment system is a new form of electronic payment system which
is based on electronic tokens rather than e-cheques or e-cash.
 Electronic tokens are generated by the bank or some financial institutions.
 Hence we can say that the electronic tokens are equivalent to the cash which are to be made
by the bank.

6. Categories of Electronic Tokens:-
1. Cash or Real-Time:-
In this mode of electronic tokens, transactions take place via the exchange of electronic
currency (e-cash).
2. Debit or Prepaid:-
In this electronic payment system, prepaid facilities are provided. It means that for transactions
of information users pay in advance. This technology is used in smart cards, electronic purses,
etc.
3. Credit or Postpaid;-
These types of electronic tokens are based on the identity of customers who issue a card, their
authentication, and verification by a third party. In this system, the server authenticates the
customers and then verifies their identity through the bank.
After all this processing the transaction takes place. An example is E-Cheques.

7. Secure Electronic Transaction (SET) Protocol
Secure Electronic Transaction or SET is a system that ensures the security and integrity of
electronic transactions done using credit cards in a scenario.
SET is not some system that enables payment but it is a security protocol applied to those
payments.
It uses different encryption and hashing techniques to secure payments over the internet done
through credit cards.
The SET protocol was supported in development by major organizations like Visa,
MasterCard, Microsoft which provided its Secure Transaction Technology (STT), and
Netscape which provided the technology of Secure Socket Layer (SSL).

8. Participants in SET :
In the general scenario of online transactions, SET includes similar participants:
1.Cardholder – customer
2.Issuer – customer financial institution
3.Merchant
4.Acquirer – Merchant financial
5.Certificate authority – Authority that follows certain standards and issues certificates(like
X.509V3) to all other participants.

9. SET functionalities :
Provide Authentication
Merchant Authentication – To prevent theft, SET allows customers to check previous
relationships between merchants and financial institutions. Standard X.509V3 certificates
are used for this verification.
Customer / Cardholder Authentication – SET checks if the use of a credit card is done
by an authorized user or not using X.509V3 certificates.
Provide Message Confidentiality: Confidentiality refers to preventing unintended people
from reading the message being transferred. SET implements confidentiality by using
encryption techniques. Traditionally DES is used for encryption purposes.
Provide Message Integrity: SET doesn’t allow message modification with the help of
signatures. Messages are protected against unauthorized modification using RSA digital
signatures with SHA-1 and some using HMAC with SHA-1,