Bank draft or transfer is one of the technologies which are used to move funds between different bank accounts. Bank drafts are performed through clearing houses (networks of financial institutions which are registered within one system in order to be able to transfer payment information securely). Two types of banking systems exist: one phase systems and two phase systems. Want to find out what the differences between them are? Then keep on reading.
In a one-phase system a merchant sends the file with transactions which should be funded to the clearing house and within several days the requested funds are given to the merchants. Then the clearing house sends these transaction requests to the banks for confirmation. And sometimes this procedure can take up to two months. But if the transaction is declined by the bank due to any reason, the merchant has to return this amount of money to the clearing house and the funds are automatically transferred back from the merchant’s bank account (this phenomenon is called an ACH return). The example of the one phase system is a clearing house in the USA which is called ACH or Federal Reserve.
In a two-phase system one additional step is added. A merchant who wants to process transactions needs to be registered within a nation-wide system. When the registration of accounts is completed the merchant obtains respective mandates and gets the opportunity to process transactions. Then the second phase takes place which resembles the process within a one phase system. BACS in the UK and SEPA in EU are the examples of the two-phase systems. Additional information on this issue is provided in the article at #UniPayGateway.