An electronic funds transfer (EFT) is a transaction that takes place over a computerized network, either among accounts at the same bank or to different accounts at separate financial institutions.
Essentially, there are six phases in the evolution of electronic funds transfers (Jason, 2014).
(1871) Phase 1: Western Union introduces its world-famous money transfer service. Western Union is an American financial services and communications company.
(1973) Phase 2: Modern-day bank transfers become possible with the founding of SWIFT. SWIFT The SWIFT international payment network is one of the largest financial messaging systems in the world.
(1999) Phase 3: PayPal shakes things up with its online payment and transfer services. PayPal is an American company operating a worldwide online payments system that supports online money transfers and serves as an electronic alternative to traditional paper methods like checks and money orders.
(2007) Phase 4: Safaricom (now known as M-Pesa) offers the first mobile phone payment and transfer service in Africa. Safaricom is a leading communications company in Kenya with the widest and strongest coverage.
(2008) Phase 5: OrbitRemit introduces a fast, innovative transfer service built around low flat fees, fairer exchange rates for consumers, and round-the-clock customer support. OrbitRemit offers a fast, safe, secure and cost-effective way to transfer money overseas.
(2010s) Phase 6: Smartphone money transfers are quickly becoming the preferred method for transferring money overseas. Popular apps such as Venmo, Squarecash, and PayPal are commonly used among smartphone users today to send money.
In the age of the Internet, it’s simple to send money around the world in a matter of minutes from any laptop or smartphone (Jason, 2014). We see this in the six phases discussed above. The use of EFTs have quickly increased in society for online bill payments, purchases and pay processes. We are quickly ascending into a totally paper-free banking system. EFT systems play a large role in this future, with fast, secure transactions guaranteeing a seamless transfer of funds within institutions or across banking networks. (Electronic Funds Transfer", 2017).
Electronic funds transfer bring a few advantages for every member of society. One of the most obvious being the ability to quickly send money from account to account, especially internationally. For those with family across the world, this gives the opportunity to connect them financially. Another advantage would be less "float time", meaning the time it takes for a paper check to process through the federal reserve.
What happens when we become a cashless society, though? Cash is already on its way to becoming obsolete. Privacy changes in a cashless world (Sorrel, 2016). Government agencies love electronic funds transfers. Without cash it is much easier for people to hide money from taxes. The big idea is that cashless payments leave behind trackable records.
The promise is that banning cash would end black markets, but for honest citizens, the end of paper cash brings many unsettling downsides. Credit card transactions are already trackable, and electronic cash could bring that lack of anonymity to every single transaction you make (Sorrel, 2017). This is unsettling to people who are uncomfortable with having their information open for government agencies to check on whenever desired. Not to mention, a ban on cash within society would primarily impact the unbanked community. For poorer people at the moment, cashless transactions are simply impractical.
Overall, it is easy to see the advantages EFTs have brought into society, but the disadvantages are undeniable as well. In my opinion, the benefits of EFTs in society have outweighed the the disadvantages. What can we expect for the future of society with electronic funds transfer technology? Only the future will tell. Until then, let's continue reaping the benefits and creating ways for all to benefit from it.
- Sorrel, Charlie. (2016, March 15). What Happens When We Become a Cashless Society? Retrieved from https://www.fastcompany.com/3056736/what-happens-when-we-become-a-cashless-society.
- (2017) Electronic Funds Transfer (EFT). Retrieved from http://www.investinganswers.com/financial-dictionary/personal-finance/electronic-funds-transfer-eft-2328.
- Jason. (2014, July 21). The Evolution of Electronic Funds Transfers. Retrieved from http://blog.orbitremit.com/the-evoloution-of-electronic-funds-transfers/.