Electronic funds transfer (EFT)
|“||consists of a group of technologies that allow financial transactions to be carried out electronically.||”|
|“||is a payments system in which the processing and communications necessary to effect economic exchange, and the processing and communications necessary for the production and distribution of services incidental or related to economic exchange, are dependent wholly or in large part on the use of electronics.||”|
Messages sent by several forms of telecommunications cause funds to be transferred from one financial account to another. The messages substitute for an exchange of currency or for a signed check that would bring about the same transfer. The term "EFT" has also come to include the transfer of information critical to such transactions without an immediate transfer of funds; for example, authorization of credit or validation of checks by telecommunications.
Most EFT services involve computers, automated data files, telecommunication links, and access systems. To fulfill the obligations of financial institutions to their users, and to guard against mistakes, EFT services create transaction logs and audit trails.
Three principal concerns about EFT privacy have arisen: (1) the extent to which personal data in EFT systems are or might be disclosed to third parties by financial institutions; (2) the possibility of Government or private surveillance through EFT systems and data files; and (3) the right of consumers to see, challenge, and correct personal data in EFT systems that might be used, for example, to refuse them credit or in other disadvantageous ways.
Security means the protection of the integrity of EFT systems and their information from illegal or unauthorized access and use. Although the loss per theft appears to be greater than for paper-based payment systems, there is no real evidence that EFT systems to date have resulted in a higher than average crime rate. Why, then, is the security of EFT systems an important public concern and potentially a major policy issue? In comparison with other payment systems, EFT appears to have some additional vulnerabilities. For example:
- EFT systems have many points of access where transactions can be affected in unauthorized ways because of direct customer involvement with the dynamics of the systems, the use of telecommunication lines, and the ways in which data are aggregated and transmitted among and between sites and institutions.
- EFT crime is often difficult to detect because funds/data can be removed or manipulated by instructions hidden in complex computer software; the dynamics of the criminal action may be understood by only a few experts within the institution.
- EFT crime offers a sporting element, or intellectual challenge, that perhaps is as enticing to some as the opportunity for financial gain. It is possible, in theory, for large banks of data to be destroyed by remote agents, creating the opportunity for maliciousness, extortion, blackmail, or terrorism.
- EFT systems reduce the effectiveness of — or eliminate altogether — some of the traditional methods of controlling and auditing access to financial accounts.
The level of EFT security violations is difficult to assess at present because there is underreporting of EFT crime, a paucity of information about EFT security, and a lack of informed public discussion. While there is a danger that giving these problems higher visibility through public discussion may at first exacerbate them, the public is entitled to know what risks they are exposed to in using EFT services. Furthermore, both law enforcement agents and financial institutions would benefit by sharing information about vulnerabilities, defense strategies, and security-enhancing technologies.
Some believe that effective technology and sound management procedures exist to adequately assure EFT security. Better information about EFT security would allow Congress and State legislatures to assess more effectively the possible need for new legislation and/or regulations.
The concept of equity includes the principles that individuals, groups, and organizations should be afforded access to necessary financial services; that the range of financial choice, rights, and benefits that consumers enjoy should not be arbitrarily reduced; and that the rules and procedures for access to and choice of financial services should not be differentially reduced for certain population subgroups.
As long as EFT is one of an array of alternative payment systems or sets of financial services, it does not appear that its use will result in a necessary or significant loss of equity to any group in society. EFT delivers benefits to many customers, and these could be increased if technology designers and financial service managers were attentive to diverse human needs. For example, dispersed EFT devices could be tailored to the needs of the handicapped, and located to meet the needs of those whose mobility is limited. EFT offers important and obvious benefits in terms of customer convenience and reduced costs and increased productivity for financial institutions (presumably for customers as well), and perhaps greater personal security for the user against crimes of violence and some kinds of privacy abuse.
However, to the extent that some forms of participation in EFT become mandatory or inescapable, or to the extent that EFT significantly displaces, reduces, or raises the costs of alternatives, some population subgroups could experience a loss of equity. Some people who choose not to deal with banks and other financial institutions could be forced to do so. People who for various reasons are poorly equipped to use EFT systems could have their access to financial services reduced. Some communities or neighborhoods could suffer a reduction in available financial services. Explicit public policies may need to be considered to preserve some level of conventional financial services if market and other forces move EFT to a dominant role.
- National Commission on Electronic Fund Transfer, EFT and the Public Interest: A Report of the National Commission on Electronic Fund Transfers (1977).
Selected Electronic Funds Transfer Issues: Privacy, Security, and Equity, at 4-6. ("Privacy," "Security" and "Equity" sections.)
- EFT and the Public Interest
- EFT crime
- EFT in the United States: Policy Recommendations and the Public Interest
- EFT system
- Electronic Fund Transfer Act of 1978
- Electronic fund transfer system
- Electronic funds transfer at the point of sale
- National Commission on Electronic Fund Transfers
- Selected Electronic Funds Transfer Issues: Privacy, Security, and Equity