Electronic Draft Capture (EDC)

Sometimes also referred to as remote deposit capture, EDC is essential to every commerce-based business. Electronic payment cannot take place without EDC capability. When a customer uses a payment method like a card or even a digital wallet, EDC is the technology that retrieves the customer’s banking information and captures the draft, or the amount due. Once the funds are secured, the money transmits to the merchant’s account. In essence, EDC is the point of sale (POS) step that closes the transaction. After the buyer’s payment is deposited into the merchant’s account, the process is complete. All business e-transactions are dependent on EDC.

POS refers to the process in which a buyer purchases a product or service. When done in person, POS takes place at a register, which has an integrated POS system, sometimes referred to as a terminal. For online transactions, POS is the checkout page when the customer enters data into the payment fields. 

For in person transactions, the merchant enters the items for purchase into the POS terminal. Once the total is calculated, the buyer must choose a payment method. At this point, if the buyer uses a card (instead of cash) they will swipe their card into a POS terminal, which has incorporated EDC capability through a magstripe reader. An authorization of the buyer’s account is done, and then, after the sale is approved, the EDC enables the initiation of funds from the buyer’s account. The sale is final when the funds are deposited into the merchant’s account, which happens within a few days. 

It can be easy to confuse EDC with Credit Card Authorization. Both concepts are involved in the execution of a transaction, but they are not at all the same. An authorization takes place during the POS phase. The card is swiped at the EDC terminal and the buyer’s account and the terminal communicate. When the purchase is authorized, or approved, that means the bank confirms the buyer’s balance is at or above the cost of the purchase. It does not, however, mean the money has been withdrawn from the account. This step is seen as a guarantee. 

EDC process happens after authorization. This is the actual transfer, or capture, of funds that are drafted into the merchant’s account, electronically. The EDC initiates the withdraw of the electronic bank draft, while the authorization confirms the account’s ability to handle the transaction at its current balance.

Retrieving money from a buyer’s account is possible through EDC technology. The process is quick and confidential. As noted, the POS terminal integrates the EDC capabilities, which are used after authorization. The EDC function will occur after the POS phase. This digital process uses the same information obtained during authorization to then initiate a draft and deposit of the amount due to the merchant. To trigger the EDC, either the process is automatic at the end of the day or the merchant submits a daily batch of transactions. From there, transfer is initiated. With a bank, it is a direct process from the merchant’s terminal to the buyer’s account. Since credit cards operate on a debt basis, there’s a third party involved called a merchant services provider that act as the payment entity to the merchant, rather than the credit card company. In both cases, the capture and deposit of funds occur within several days. 

Not all cards are made the same. It’s important to note that cards using the Europay, Mastercard, and Visa (EMV) chip use a different technology to transmit information than cards relying on the magnetic stripe. Both versions have the same purpose, however the stripe is a static entity while the chip is a digital entity with dynamic cryptographic information. A third payment option, the smart phone digital wallet, stores data in a similar way as a chip. 

Swiping is currently the standard payment method businesses use with POS. On the back of a card is a stripe that’s usually black. In this stripe the user’s account information is digitally stored. The magnetic stripe looks like one solid line, however there are actually three separate elements, or tracks, imbedded in the stripe. Information includes details like the account holder and the metrics of the account like the card number and pin number. These elements are found in two of three tracks in the stripe, while the third track, which entails currencies enabled for use (necessary for international payments), is not used in daily transactions, unless of course the user regularly makes global purchases. The three stripe tracks are transmitted when a buyer swipes their card through the POS terminal. A magnetic reader in the terminal is designed to read the account information from the card’s stripe. 

The EVA chip cards are replacing the magnetic stripe because the information is considered more secure in chip form. Instead of static, imbedded information on a stripe, the chip holds data, like a computer. Here, the buyer dips their card into a chip reader, which reads and records the data like a swipe terminal. But it’s a lot harder to make a fake chip than a fake magnetic stripe. 

A digital wallet stores information in the smartphone or app. The same process applies when a transaction is made, that is, there’s an authorization process and then the payment must be submitted for draft capture and settlement by the merchant. This is also considered a safe bet against fraud as phones can be protected by passcodes and even fingerprint identification. Phones can also be wiped out remotely, all of which ensures information stays protected. 

EDC is traditionally implemented through the magnetic stripe technology, but as the chip gains popularity, a transaction’s capture process is used in chips as well, using an assigned Dedicated File, or DF, Name. Capture happens with digital wallets, as well. 

The specific procedures in capture vary throughout the world, however. For example when it comes to MasterCard in Brazil, the Maestro Magnetic Stripe Mode Contactless Transaction requires a CVC 3 code be approved during authorization. This is an extra step in EDC, which in some places this or a similar step may or may not also be required. 

EDC is part of the modern e-commerce process. Any business that accepts non-cash payments will have EDC as part of their transaction path. More and more, buyers are not using cash to pay for products and services – in fact, as the world escalates online, e-commerce is on the rise. Due to COVID-19, e-commerce has become essential worldwide and, according to Forbes, changes in buying behaviors will stick even when growth stabilizes. Cards will likely continue to be the preferred method of payment. In this digital world, EDC is a way of business.

The speed and ease of EDC is part of what makes digital commerce so popular. With electronic check deposits, EDC means no paper trail to track since deposit slips are no longer necessary. Transactions are seamless and done automatically, though business owners occasionally do need to approve the transaction.