Electronic Funds Transfer

The work of Kirkman (1987, pp. 66) defines electronic funds transfer (EFT) as "EFT systems should cover all money transfers in which processing is carried out partly or completely by electronic methods." (Kirkman 1987, pp. 66)

In order to purchase goods using electronic funds transfer, the customer needs a debit card. This can then be used for EFT up to the customers account balance.

As a debit card is not a credit card, the customer cannot go over his/her account balance.
The picture on the right shows a debit card (with the details obscured!) (Courtesy of TSB Bank)

At the supermarket, after the goods have been scanned, and a total sales value is in the EFTPOS unit, the customer hands his or her debit card to the cashier, who swipes it through the card reader in the POS unit. The POS unit makes some checks (discussed later) on the card, and subject to passing the checks, prints out a payment slip with the amount printed on the slip.

The customer then authorises the sale by signing the slip. The cashier checks the signature on the payment slip with the signature on the card. If the two match, the sale is confirmed into the POS unit, and the transaction, for the customer, is over. The supermarket may have their system set up to transfer the money now, or at a later stage. This is dependent on how the EFTPOS software has been configured by the supermarket.

The picture on the right is an ICL magnetic stripe reader. This is used to read the debit card details into the terminal.

Security Checks

After a debit cards details have been entered into the POS terminal, the terminal automatically performs some security checks on it. The first, is a check to see if the funds are available. The terminal does this by contacting the cardholders bank, which then sends back a response, saying whether the customer has enough money available. If so, payment is then guaranteed to the retailer. The second check performed is to check whether the card is stolen. The card number is checked against a central database of stolen card numbers. The central database sends back a response, confirming (or denying) the legality of the card. If the response says that the card is not stolen, then the transaction can proceed.

Advantages to the Customer

These include:

Advantages to the Retailer

These include:

Personal Views

To draw this section to a close, I think it is fair to say that electronic funds transfers only count for a small proportion of transactions that take place. Many people, particularly older people still prefer to use cash for payment. Younger people are more willing for change to take place, and hence are more will to pay for goods electronically. I think that, as we move into the 21st century, the usage of electronic payment methods will increase, although it would seem unlikely for the current system of magnetic stripe plastic cards to change in the near future.


Kirkman, P. 1987, Electronic Funds Transfer.

ICL, Available Online [WWW]

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