Electronic funds transfer, often abbreviated as EFT, is a system for moving money from one account to another without the use of checks. Instead, money is transfered through such electronic systems as computers (mainly through the Internet) and ATMs. The mechanics of EFTs are simple. First, the payee gives a nine-digit routing number, also called an ABA number, to the payor. The payor then uses a method such as an ATM, telephone-banking system, computer-banking system, automated clearinghouse, or point-of-sale terminal to pay the payee the agreed amount of money. For example, an employee that wants his employer to directly deposit his pay to a bank account would furnish the routing number to his employer. For periodic transactions, the payor directs his bank to debit his account and credit the lender's account using the ABA number. The general uses of EFTs are to pay bills or pay employees.

IT systems needed for e-commerce:

• ATM- performs banking services when a customer inserts a card and pushes the proper coded buttons
• Telephone-banking system- this is where you would call your bank so that they make the transaction for you based on the ABA number you give them.
• Computer-banking system- this is where you go to your bank's online web site so that you can make the transaction based on the ABA number you have.
• Automated clearinghouse- the most common payment system in the U.S. for making and recieving electronic transactions.
• point-of-sale terminals- best way of making electronic transfers in a traditional retail environment.

EFT advantages and disadvantages:

• Advantages:
  • save money- some banks charge money for checks
  • easy to use- simple instructions and format
  • convenient- easy to find places in which to operate EFT processes
  • not time consuming- some EFT processes are automatic
• Disadvantages:
  • releasal of private information
  • no human interaction
  • few EFT devices in certain areas of the world
  • EFTs such as an ATM are not fully secure and can be broken into

Issues of EFT:

• Reliability- someone can put the wrong numbers into an EFT and possibly not know it
• Integrity- tampered EFT systems can begin to work unproperly, breakdown, and cause other problems
• Security- unauthrized access can result in lost or stolen information and money
• Privacy- becomes lessened when giving someone your ABA number for EFT use
• Authenticity- an EFT such as an ATM does not know if the person using it is truly who they say they are
• Equality of Access- EFTs are hard to access in some third world countries
• Control- EFTs improve the rate at which business transactions are done
• People and Machines- possible loss of bankers and other jobs because of EFTs

Sources:

• http://reference.howstuffworks.com/electronic-funds-transfer-encyclopedia.htm
• http://dictionary.reference.com
• http://www.walletpop.com/banking/article/_a/bbdp/electronic-funds-transfer/92169