Commercial Law-Payments Systems: The Historical Development of Electronic Funds Transfers - Research Paper Example

Additionally, electronic funds transfers came with a reduction in the paperwork involved in ordinary money transfers. There is also a great improvement in the time loss creating paperwork and reconciling cash transfer transactions. Today, the development of the EFT technology took place at a time when consumer awareness and expectations call for safeguards and disclosures in the linkage of money transfers. The electronic payment system involves three sources which are retail customers, wholesale customers, and multiple miscellaneous payments. The most recently used systems of electronic payment systems include credit cards, national networks; electronic funds transfer systems, GIRO transfers, mutual terminal systems, value exchange systems, and point-of-sale payments. Other forms of electronic payments are the automatic deposits of payrolls and social security, and non-bank networks. In electronic payment systems, the value exchange system involves transfer from the consumer to the merchant and vice versa; between a merchant and local bank; between local banks and credit card processing bank; and between the bank issuing the card and the bank processing the credit card.

Another instance of the value exchange system is between the card issuing bank and the consumer. As different parties within the value exchange system exchange values, data is transferred and money in form of paper is not. For instance, when one uses a credit card at a store, the money held in the checking account is transferred into the bank account of the respective store. Again, when a consumer authorizes direct deposit payroll transfer one's money from the employer’s bank account into the account of the respective recipient.

Although EFT methods are related to online, money transfer, there is a distinction in that online money transfer equates to wiring money such that money is sent to someone instantaneously through the simple act of changing ownership of data representing one’s money from oneself to another person. Conversely, EFT involves money transfers for commercial and non-commercial transactions and uses a low-cost platform where money is moved from one account to the other both held by different account holders.