ELECTRONI CLEARANCE SERVICE

 

ELECTRONIC CLEARANCE SERVICE (ECS)

ECS is an electronic mode of payment/receipt for transactions that are repetitive and periodic in nature. It is an electronic mode of funds transfer from one bank account to another bank account using the services of clearing house. It facilitates bulk transfer of money from one bank account to many bank accounts or vice versa.

Features:

a)      It is an on-line money transfer process.

b)     Bulk fund transfers from one account to many accounts is possible through this service.

c)      This can be used both for making payments of dividend, interest or for collection of amounts of telephone, electricity charges etc.

d)     There are two types of ECS called ECS(Credit) and ECS(Debit).

·        ECS Credit

ECS credit is used for allowing credit to a large number of beneficiaries by raising a single debit to the customer’s account, such as dividend, interest or salary payment.

·        ECS Debit

ECS debit is used for raising debits to a number of accounts of consumers or account holders for affording a single credit to a particular institution, in cases such as utility payments like electricity bills and telephone bills.

Advantages:

a)      It does not require frequent visits to bank for paper compliance which saves time of account holders.

b)     It reduces administrative work which saves administrative cost.

c)      It avoids chances of loss of instruments in postal transit.

d)     It also avoids chances of frauds through fraudulent access .

e)     It assures right payments at right time.

f)       It reduces paper handling and paper cost accordingly.

g)      Record of transfer helps to track the record of transits.

Disadvantages:

a)      It requires an online account which can be inconvenient sometimes.

b)     It also needs to maintain an account per organisation, which can be bothersome for some.

c)      Sometimes, if passwords hacked , serious financial loss can be caused.

d)     It becomes difficult to identify theft if virus protection or firewalls are not used for computers.