Electronic payment represent the third great age of payment systems, following cash and paper-based transfers. An electronic payment transfer may be defined as any transfer of funds, other that a transaction initiated by a charge or othwr similar paper instruments, made through an electronic terminal or computer or by means of magnetic tape so as to order, instruct or authorise a participating financial institution to credit or debit an account.

The need for electronic funds transfers has developed because of changing social and economic expectations of customers on one hand. and availability of techanological options to implement such systems on the other.

Technology in banking has been used in four major ways: To handle a greatly expanded customer base, to reduce substantially the real cost of handing payments, to liberate the banks from the traditional constraints on time and place (anytime/anywhere banking) and to introduce new value added products and services.

Although recent statistics show a decline in the use of cheques as a means of payment in most developed countries. Banks nevertheless need to solve the problems that arise from the physical movement of paper in the clearing process. To a limited extent this has been achieved by the cheque transation which involves the capture of releveant date to enable payment of each cheque to be made to the payee's account, and simultaneously for the drawer's account to be debited. without the physical movement of the cheque itself.

Another method followed is Document Image Processing (DIP) in which paper documents can be converted into a digital format. This permits all forms of documents to be stored, retrieved and manipulated by computer systems.
An electronic credit system introduced in India has received a good response during the last two years. The 1997-98 fiscal year witnessed 2-3 million transactions, while the 1998-99 half year had 3-2 million transactions in the electronic credit system.

Electronic funds transfers can be broadly classified into inter- country payment systems. inter-bank payment systems within a country. intra-bank inter-branch payment systems and EFT at the point of sale. 

The need of the hour consists not merely in improving the paper based payment system but also in integrating the various components of the system. Designing an integrated system would first require a clear appreciation of the architecture, and the role of the associated binding agentst of payment and settlement transactions across markets local, national and international.

First efforts in the direction started in the Indian Banking industry when BANKNET was commissioned in February 1991, based on CCITT (Consultative committee for international Telegraphy and Telephony X. 25, 1984 Packet Swtich Protoco). This was further enhaced by commissioning of RBINET in 1996 using TCP/IP protocol.

If IT represents "Information Technology", tronically IT also can represent "investment trap". Once an organisation accepts information technology as a strategic response to combat competition in globalised environment, it automatically gets to the investment trap. 

It becomes virtually impossible to run the old manual processes, and procedures. as customer expectiations take a different path. It is in this context that the banks have to innovate new products and services using continuously changing IT product and services.
