Electronic funds transfer (EFT) is the electronic transfer of money from one bank account to another, either within a single financial institution or across multiple institutions, through computer-based systems and without the direct intervention of bank staff.
To provide a variety of adequate payment instruments to the growing corporations and the corresponding increase in their transactions, Bank of Uganda in August 2003 implemented the Electronic Funds Transfer (EFT) for both credit transfers and direct debits. The EFT system provides fast, convenient, reliable and secure domestic payment and collection of funds.
Credit Transfers are predominantly being used by government and corporate customers to transfer salary payments to the employees’/beneficiary’s account. Payment instructions using this channel have picked up both in volumes and values especially after capping cheques to UGX 20 million in July 2007, resulting into government stopping issuing cheques to its suppliers and employees in favour of EFTs.
Direct debits involve periodic financial instructions from a customer to his/her bank authorizing a utility provider or any organization to collect funds from their account to settle an obligation. Since January 2007, some schools have embraced EFTs for payment of fees/tuition. EFT sensitization and technical workshops have been held in Mbarara, Kigezi, Rwenzori, Mbale and West Nile Regions.
Consequently, some parents have appreciated use of Direct Debit Agreements (DDAs) to pay fees. Utility consumers are slowly beginning to use EFTs to pay for water, electricity, telephone and insurance bills.
Commercial Banks are expected to credit a beneficiary’s account within 24 hours upon receipt of a credit transfer instruction, and to debit the payer’s account within 48 hours on receipt of a direct debit instruction confirmed against a mandate.
All the twenty two commercial banks participate in processing of EFT transactions which may be initiated by their individual or corporate customers.