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Full Project – Design and implementation of an electronic fund transfer system

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CHAPTER ONE

1.0 INTRODUCTION

Electronic Funds Transfer (EFT) is a system of transferring money from one bank account directly to another without any paper money changing hands. One of the most widely-used EFT programs is Direct Deposit, in which payroll is deposited straight into an employee’s bank account, although EFT refers to any transfer of funds initiated through an electronic terminal, including credit card, ATM, Fed wire and point-of-sale (POS) transactions. It is used for both credit transfers, such as payroll payments, and for debit transfers, such as mortgage payments.

Transactions are processed by the bank through the Automated Clearing House (ACH) network, the secure transfer system that connects all U.S. financial institutions. For payments, funds are transferred electronically from one bank account to the billing company’s bank, usually less than a day after the scheduled payment date. The growing popularity of EFT for online bill payment is paving the way for a paperless universe where checks, stamps, envelopes, and paper bills are obsolete. The benefits of EFT include reduced administrative costs, increased efficiency, simplified bookkeeping, and greater security. However, the number of companies who send and receive bills through the Internet is still relatively small.

The U.S. Government monitors EFT compliance through Regulation E of the Federal Reserve Board, which implements the Electronic Funds Transfer Act (EFTA). Regulation E governs financial transactions with electronic payment services, specifically with regard to disclosure of information, consumer liability, error resolution, record retention, and receipts at electronic terminals

1.1 STATEMENT OF THE PROBLEM

Payment for goods and services is characterized by long queues; long distance traveling and time wasting that generally affect business activities and ultimately economic development. Settling utility bills, payment for goods and services, and money transfers have been a major headache for individual and firms resulting in declined business activities and huge debt to most of the utility providers. In fact, the country has not yet realized the full benefits of the technological advances in electronic payment such as the use of cards, automated teller machines (ATM), the Internet, mobile phones, etc. The payments and clearing system in the country is underdeveloped. For instance, cheques drawn against accounts held in banks taking could take three days whilst cheques drawn on different regions can take several weeks. There is no central clearing system to clear debit card transactions between banks. The banking halls continue to be immersed in the long queues as people come in to collect their monthly wages or salaries. Many people have been holding large sums of money outside the banking system as a result of the ordeal one has to go through before withdrawing money or making payment. However, faced with such problems in the payment process, only a few payment solutions have been introduced so far to solve them. Cash still remains the most popular retail payment instrument, despite the increase in the introduction of electronic fund transfer schemes. Whether consumers are adopting the current and emerging payments mechanisms is another issue confronting the banks

1.2 OBJECTIVE OF THE STUDY

The objectives of this work design an Electronic Fund transfer system (EFTs), compare the advantages of old bank fund transfer systems or payment systems, with the new electronic fund transfer system.

1.3 SIGNIFICANCE OF THE STUDY

A design report of this kind is expected to make theoretical and practical contributions to the present day electronic banking system, by taking a critical look at previous payment systems, and the advantages of the new electronic fund transfer system developed.

1.4 SCOPE OF THE STUDY

This work is intended to cover the analysis and development of an electronic fund transfer system, a review of previous and existing payment methods was done, with a special interest in the electronic transfer mode.

1.5 LIMITATIONS OF THE STUDY

There were some limitations or constraints during the course of this study, they are as follows:

TIME: There was no time to carry out this research, due to the fact that I combined the research work with my academic studies. You can agree with me that time constraints is one of the limitations I experience while carrying out this research work.
FINANCE: Finance was another constraint I experienced while carrying out this research. The inadequate of finance to carry out this research slow down the research work. Despite the limitations, every effort was geared towards accomplishing this project.

1.6 DEFINITION OF TERMS

BENEFICIARY: means the person designated as such, and to whose account payment is directed to be made in a payment order.

BENEFICIARY BANK: means the branch of the bank identified in a payment order in which the account of the beneficiary is to be credited.

EFT: Electronic Funds Transfer.

EFT DATA FILE: mean’ an electronic data file of a batch of payment orders for funds transfer processed and consolidated in the manner specified for transmission Of consolidated payment orders.

EFT Service Branch: means an office or branch of a bank or institution in a center designated by that bank or institution to be responsible for processing, sending or receiving EFT data file of that bank or institution.

EFT SYSTEM: means the Electronic Funds Transfer System established by these Regulations for carrying out inter bank and intrabank funds transfers.

FUNDS TRANSFER: means the series of transactions beginning with the issue of originator’s payment order to the sending bank and completed by acceptance of payment order by the beneficiary’s

INSTITUTION: means a public financial institution.

ORIGINATOR: means the person who issues a payment order to the sending bank.

PARTICIPATING BANK OR INSTITUTION: means a bank or as the case may be an institution admitted for participating into the EFT System.

PAYMENT ORDER: means an unconditional instruction issued by an originator in writing or transmitted electronically to a sending bank to effect a funds transfer for a certain sum of money.

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