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hdfc02My property management company in UK wanted me to quote the following reference along with my monthly rent payment:


While I could’ve easily written this on the back of a cheque, there was no way to do this on an electronic payment since the reference field of my Online Banking’s fund transfer screen didn’t let me type beyond MCS MERIDIAN CLI

As a payments professional, I knew that inadequate remittance info would make it tricky to reconcile a payment and risk the payment falling into a “cyberabyss”. Therefore, I refrained from paying my rents electronically. Click here for more details.

I’ve encountered similar situations many times through the following years in India. Ergo, I’ve shied away from electronic fund transfer (EFT) methods like NEFT.

I recently came across a few examples of individuals and businesses who have developed cold feet towards EFTs.


I know a company that always paid its ISP’s bills on time but found its Internet connection getting disconnected for non payment of bills. Because I know a bit about the inner workings of payment networks, they sought my help to figure out what was happening. This is what I found out:

The ISP needed some basic info like Customer Number and Bill Number along with the payment so that it could match its collections against the specific invoice. The company couldn’t fit this info in the reference field of its NEFT transfer. Thinking “What can go wrong?”, the company went ahead anyway and made the payment electronically. Big mistake. Lacking adequate info to link the payment to the company, the receipt fell headlong into the ISP’s cyberabyss. As per the ISP’s accounts receivable system, the bill is outstanding. Ergo it disconnected the company’s Internet connection. It took a lot of back-and-forth interactions between the company and the ISP to resolve the mess.

These days, this company pays its bills strictly by cheque. It can write as much “remittance info” as the ISP wants on the reverse of the cheque. Ever since it switched to cheques, it has never suffered disconnection of its line.


My alma mater’s alumni association recently conducted a short event for which it charged a token fees of INR 200 (~US$2.5). It accepted payment via cheque and NEFT. In the past, the limited amount of info accompanying NEFT payments had caused it huge amount of reconciliation problems. Therefore, this time, it went out of the way to devise a comprehensive procedure to ensure that all NEFT receipts could be traced back to the appropriate source and given due credit. While you can find the full details of the procedure in the following diagram, suffice to say that it involved jumping through several hoops across website, email and telephone.


While we were all uniformly appreciative of the efforts of the alumni association for trying to rectify what was essentially a lacuna in the EFT rails, an overwhelming majority of attendees simply wrote cheques.


Inadequate remittance info can pose problems even when you receive payments. When I used to get dividends, income tax refunds, insurance payouts and other payments by cheques in the past, they’d be accompanied by a statement providing details of the company, scrip, product, period, contact info in the event of discrepancies, etc. Now, they hit my bank account directly and I can barely make out the identity of the payor from the cryptic narration that accompanies them e.g. “ACH C- IOC REF NO3000089966-509038878490”. Now, if you’re like a lot of people I know, you might not care where money has come from as long as you’ve got it. There are a few problems with this approach:

  1. You can be implicated in a crime if the source of the money is not kosher, even if the money entered your account without your knowledge or approval
  2. How’ll you report these receipts in your tax returns?
  3. If the money does not belong to you, it’s a crime not to report it to your bank, even if somebody else deposited it into your account.


As the above examples show, inadequate remittance info has stunted the growth of EFT for sending and receiving retail payments.

Hopefully, there’s light at the end of the tunnel.

According to this report, UK is seriously considering mandating longer remittance fields for electronic payments. Hope other countries follow suit. It’s a no-brainer that enriched remittance info will go a long way towards driving up EFT volumes.


By projecting longer remittance fields as a panacea for reconciliation challenges in EFT, I’ve made an implicit assumption in this post that the receiver will see the same narration that’s written by the sender of the payment. TIL from a friend that I could be mistaken about that assumption.

After reading his comment on my Facebook update, I immediately realized why my assumption could be wrong: The narration seen by the receiver is shaped not only by the system used by the sender bank but also by those used by the scheme operator and the receiver bank. AFAIK, there’s no guarantee that these three disparate systems will handle the content of the narration field in the same way, especially when there are examples of banks that follow different practice for narration fields for different payment schemes within the same bank!

Given the multiple parties involved in fulfilling an end-to-end EFT payment, it’s highly plausible that the receiver doesn’t see the same narration that was entered by the sender. I also learned from my friend that the receiver of an NEFT payment sees the sender’s account details in the narration field but the receiver of an IMPS payment does not. Ergo, reconciliation of EFTs is even trickier than I’d imagined. Amen.

Ketharaman Swaminathan On July - 8 - 2016


BFSI, Product, Uncategorized


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