U.S. consumers and electronic banking, 1995-2003

Federal Reserve Bulletin,  Winter, 2004  by Christoslav E. Anguelov,  Marianne A. Hilgert,  Jeanne M. Hogarth

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Electronic check conversion. The process by which information from a check (routing number, account number, and amount of the transaction) is converted into electronic format in order to make a one-time electronic fund transfer from an account. (1)

Electronic fund transfer (EFT) The movement of "money," or credits, from one account to another through an electronic medium.

Payroll card. A type of stored-value card issued by an employer instead of a paycheck that enables an employee to access his or her pay at ATMs or point-of-sale terminals. The employer adds the value of the employee's pay to the card electronically.

Preauthorized debit (or automatic bill payment). A form of payment that allows a consumer to authorize automatic payment of regular, recurring bills from his or her account on a specific date, and usually for a specific amount (for example, car payments, housing payments, and budget-plan utility bills). The funds are electronically transferred from the consumer's account to the creditor's account.

Prepaid card. A stored-value card on which monetary value is stored and for which the consumer has paid the issuer in advance.

Smart card. A type of stored-value card in which one or more chips or microprocessors are embedded, making the card capable of storing data, performing calculations, or performing special-purpose processing (to validate personal identification numbers, authorize purchases, verify account balances, and store personal records). The memory in some smart cards is updated when the card is used. The chip or microprocessor physically stores records, such as the value of funds remaining on the card. These cards can be used in "closed" systems (for example, a transit system) or "open" systems (for example, MasterCard or Visa networks).

Stored-value card. A card on which monetary value is stored, through either prepayment by a consumer or deposit by an employer or other entity. For a single-purpose stored-value card, the card issuer and acceptor are generally the same entity, and the funds on the card represent prepayment for specific goods and services (for example, a phone card). A limited-purpose card is generally restricted to well-identified points of sale within a given location (for example, vending machines at a university). A multi-purpose card can be used at several service providers for a wide range of purposes; it may carry a MasterCard or Visa logo or the logo of another interbank network.

Note. The definitions in this glossary are meant to give a general understanding of terms used in electronic banking. They are not legal definitions, but they generally assume compliance with applicable legal requirements. The terms may be used differently in different situations, and their exact definition under federal law may differ from that under state law. These definitions are generally consistent with those in the "Glossary of Terms Used in Payments and Settlement Systems" issued by the Bank for International Settlements (www.bis.org/publ/cpss00b.htm) but are less technical.