Electronic Clearing Services (ECS) are an electronic mode of payment/receipt for transactions that are repetitive and periodic in nature. These are electronic payments offered by banking channels for receiving or making payments. Electronic Clearing Service is a mode of payment by an institution and receipt by individuals for interest, dividend, salary, pension, etc. It is a facility for sending payment instructions electronically. This is an electronic money transfer facility in which money is transferred automatically from a payer’s to payee’s bank accounts. So, ECS is an electronic clearing service facilitates paperless credit/debit transaction straight linked to your account and also provides for an earlier method of effecting periodic and repetitive payments. ECS can be used for both credit and debit purposes.
A large number of investors, shareholders, employees, ex-employees can receive their dues electronically directly into their accounts on due dates without using paper cheques/instruments. Similarly, bank customers can make small value repetitive payments such as electricity bills, telephone bills, loan installments, insurance premium, club fees, etc. This system accommodates a quicker method of payment and fund transfer from one account to the other, utilizing the administrations of a clearinghouse. The payer instructs their bank to make direct debit payments and the payee provides amounts and dates of the payments. It can be used by institutions for making payments such as a distribution of dividend interest, salary, pension, among others.
The process operates on the basis of a large number of small debts and one consolidated credit from users to the service provider. The system provides the convenience of paperless payment on due dates by direct debit to the customer’s account. This facility can be used for paying different amounts and is useful for paying regular bills. It tends to be utilized by foundations for making installments, for example, conveyance of dividend, interest, salary, and pension. Advantages of this system are guaranteed payments and no need to remember payment dates.
