Investment

Bangladesh Electronic Funds Transfer Network – BEFTN

by Sadnan Bin Sattar

A developed and an advanced payment system is very crucial for a country’s monetary and financial infrastructure and it plays a vital role in the country’s current and future economic development. Few years ago, Bangladesh Bank had a partnership with the U.K. Department for International Development (DFID) which was known as the Remittance and Payments Partnership (RPP). The RPP project included one of the two major payment system components which was known as BEFTN. Though it is the most critical component in the development of a modern payments system infrastructure, it will become the most powerful payments system in Bangladesh in near future.

 

Bangladesh Electronic Funds Transfer Network – BEFTN

What is BEFTN – Meaning of BEFTN

To explain the BEFTN, Bangladesh Bank says it is basically a system to transfer money from one bank to another directly without money changing hands. It is a highly reliable and efficient nationwide electronic funds transfer system which facilitates inter-bank payments, clearing and settlement of electronic credits and debits. Bangladesh Bank placed a new set of regulations and forced all the banks to maintain the regulations to ensure a secure payment system.

BEFTN has first started its operation in 2011 in Bangladesh in order to reduce paper-based payment system in the banks. The objective of launching BEFTN was to encourage people to adopt with electronic payment methods for secured, faster & cost-effective transactions.

How Does BEFTN work?

BEFTN operates both as a processing center and delivery center for the distribution and settlement of electronic credit and debit instruments among all the participating banks. This network will be run in a real‐time batch processing mode. Transaction files which are being received from the banks will be processed to ensure if there are conditions that would result in a file or batch rejection. The banking company will have enough time to fix the errors and problems and resubmit the file.

Again, all the commercial banks of Bangladesh are the members of the BEFTN hub in order to send and receive payments. Payments can be made to individuals or institutions. payment instruction should be provided by the Bangladesh Bank. All the banks under this network are provided with unique routing codes. So when payment instructions are being initiated, it is mandatory to use the routing code for the beneficiary branch. All payment transactions will be calculated into a single multilateral netting figure for each individual bank.

Finally, all the banks in the network will be interconnected via communication links. This communication network will provide faster, safer and a more efficient means of inter‐bank clearing using the existing paper‐based system. BEFTN will also offer a wide range of electronic products which will improve the payment services for the customers of participating banks. It will also lower the operational cost, reduce risk and will increase the efficiency of the overall payment process.

BEFTN Cut-off Time

Cut off time for BEFTN is 04:00pm.

For online banking, the cut off time is same. So, the BEFTN transaction must be authorized by the final authorizer before 04:00 pm the transaction to be executed in the next day. 

Features of BEFTN

  • End-to-end electronic form.
  • EFT transaction could be debit or credit.
  • It will operate in real-time batch processing mode.

Charges for BEFTN

It also offered debit & credit transaction facilities under its electronic fund transfer (EFT) network to provide people an easy, faster and hassle-free service.

Advantages of BEFTN

  • It will create smooth payment system among all the branches across the country.
  • It will ensure highly secured payment service since there will be no chance of alteration unlike in the case of the existing paper-based system.
  • It will be efficient since it is paperless & automated. It will optimize bank’s cash flow management process and working capital cycle.
  • Payment initiation will make an end-to-end automated process with auto reconciliation capabilities.
  • EFT reduces turnaround time significantly in the majority of cases to one day from a number of days from traditional payment mechanisms.

Disadvantages of BEFTN

  • BEFTN is the most critical component in the development of a modern payments system infrastructure.
  • When an amount is transferred through BEFTN, the bank cannot able to reverse the transaction.

From the above discussions, it is clear that BEFTN will increase the efficiency in the banking payment service in the near future. This network will have extensive reach by connecting among all the branches. No other electronic network would have the reach of BEFTN. This will become a significant advantage over the payment systems in Bangladesh.

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Reference (s)


1) https://www.bb.org.bd/fnansys/paymentsys/eft.php
2)https://www.bb.org.bd/aboutus/regulationguideline/beftn_operatingrules.pdf
3)https://www.sc.com/bd/beftn/en/_documents/Learn%20about%20BEFTN.JPG
4) http://www.bankpara.com/defining-bach-beftn-and-rtgs/
5) http://www.bankasia-bd.com/home/beftn
6) http://en.prothom-alo.com/economy/news/47835/New-regulations-for-electronic-fund-transfer
7) https://bangladesheconomy.wordpress.com/2011/10/01/people-now-get-electronic-fund-transfer-facilities/
8) https://ibb-bankingdiploma.blogspot.com/2015/06/state-settlement-procedure-for-online.html
9) http://www.thedailystar.net/news-detail-196935
10) https://www.termpaperwarehouse.com/essay-on/Beftn/257810
11) https://www.slideshare.net/kazimohammadismail1/bangladesh-automated-clearing-house-64979559
12) https://www.coursehero.com/file/p4osnnh/BEFTN-Bangladesh-Electronic-Funds-Transfer-Network-is-a-highly-reliable-and/