If you’ve ever used a debit card or set up a direct deposit transaction, then you’ve made or received an electronic funds transfer (EFT). These transactions move money between bank accounts without paperwork or a bank employee's help. EFTs are handy, but types differ in speed, cost, and security, especially for B2B payments. Here’s what you need to know about EFT payments, including how they work, when to use them, and how to set up EFT payments for your business. Key takeaways An electronic funds transfer (EFT) is a way of transferring money directly between bank accounts without the need for paper checks or other physical paperwork. EFT payments have been around for decades but are becoming increasingly popular — non-cash payments have been increasing by 9.5% per year. EFTs transfer money between accounts within the same or different banks, even internationally. Various EFT types exist, each with its own pros and cons, but all have the same basic parts: EFTs can be used to withdraw cash, pay bills, send money to a friend or family member, receive payment from an employer, or make a purchase using a debit or credit card. An EFT transfer can take anywhere from a few seconds to a few days to process. EFT is an umbrella term that encompasses several different types of payment methods. An electronic transfer used to pay for goods or services is called an EFT payment. Some of the most common types of EFT payments include: EFTs are usually faster, more convenient, and cheaper than traditional payments. EFTs can start anytime, even outside bank hours, but transfers can indeed take days. EFT processing mostly happens behind the scenes. When you send or receive an EFT payment, it goes through the following steps: The EFT process varies by transaction type. ACH transfers go through a third-party ACH network, and are usually processed in batches. Credit and debit card payments go through a card network like Visa or Mastercard, and may also involve a payment processor like Stripe, PayPal, or Plooto. There are different types of EFT payments for different use cases. Let’s take a look at some of the most common examples: Electronic checks, or eChecks, are the digital equivalent of a paper check. They use your bank account and routing number to transfer money to the recipient. If you’re a business, then accepting check payments online means you don’t have to wait for a check to arrive in the mail or go through the hassle of depositing it. A direct deposit is a type of EFT transfer in which a paycheck is deposited directly into an employee’s bank account, usually on a recurring basis. Direct deposits cut down on administrative work, and allow the employee to receive their paycheck faster. Automated teller machines (ATMs) allow customers to access their funds or make a deposit outside of banking hours. ATM transactions are a type of EFT transfer. Credit and debit card transactions are electronic transfers processed by a credit card network. The payment processor draws funds from the recipient’s bank account or line of credit and credits it to the recipients’ bank account. This is one of the most secure forms of EFT due to the rise of virtual credit cards and chip technology. With more online banking, customers can pay without credit or debit cards. Customers can store money in a mobile wallet, initiate peer-to-peer transfers, and schedule online bill payments. Phone payments are less common with the rise of online payments, but they’re still an option for consumers who don’t have access to a computer. Some pay-by-phone systems use interactive voice response, or IVR, to guide customers through the process. Wire transfers are primarily used for B2B payments because they can transfer large sums of money more quickly than other types of EFT payments. However, they also tend to have higher fees than other payment methods. EFT payments are a relatively safe form of payment, and are usually more secure than traditional payment methods like cash or check. But as with any payment method, EFT transfers do have some risks. Fraudsters could make an unauthorized purchase, or a sender could provide the wrong details and send the money to the wrong place. Here are some of the security practices that keep your money safe: Financial institutions do most of the work when it comes to security. But there are still steps that businesses and consumers can take to keep their EFT payments safe: ACH transfers are a type of EFT payment processed by an automated clearing house, or ACH network. ACH payments are processed in batches, usually overnight, so they take longer to clear than other types of EFT payments. ACH transactions are best for recurring payments, such as payroll. For large sums or one-time transfers, other payment methods provide more speed and flexibility. EFT payments are here to stay. According to the Federal Reserve, ACH transactions alone accounted for $91.85 trillion in non-cash payments in 2021. But EFT payments have their pros and cons. Here are just a few of them: Pros Cons Pros Cons Pros Cons Pros Cons Pros Cons Pros Cons EFT payments can be used for international payments, but the process can vary depending on which EFT payment is used. Making an international payment is a lot like making an ACH payment, but it may take longer to process. Instead of going through the ACH network, your payment may need to go through an international banking system like the SWIFT or IBAN network. In the U.S., EFT payments are regulated by the Electronic Fund Transfer Act (EFTA), which sets out compliance and record-keeping requirements. Electronic transfers may not be available to all countries, and you may need to pay higher transaction fees. Some payment providers, like Plooto, allow you to make international payments with borderless payment processing. You can make cross-border payments (in the same currency), as well as FX transactions with no foreign transaction fee. One notable example of the benefits of EFT payments is The Influence Agency, a leading digital marketing firm that leverages Plooto to automate their accounts receivable process. Before adopting Plooto, The Influence Agency faced significant challenges with manual payment processing, such as time-consuming reconciliation tasks and high processing fees for international transactions. Benefits experienced by The Influence Agency: By implementing Plooto's EFT solutions, The Influence Agency not only optimized their financial operations but also significantly improved their overall business efficiency and cost-effectiveness. Business-to-business (B2B) EFT payments are money transfers between businesses that are handled electronically. These might include recurring payments to a vendor or supplier, or one-time payments to a contractor or freelancer. As with B2C payments, you can make B2B EFT payments with an electronic check, a debit or credit card, an ACH transfer, or another EFT payment method. B2B EFT payments are ideal for modern businesses because they allow you to send and receive money faster and maintain a digital paper trail. B2B EFT transfers allow for:What is an electronic funds transfer (EFT)?
What is an EFT payment?
How EFT payments work
7 common types of EFT payments
Electronic checks
Direct deposit
ATM withdrawals
Credit card transactions
Internet transactions
Phone payments
Wire transfers
Are EFT payments safe?
EFT vs. ACH
Pros and cons of EFT payments
Pros of EFT payments
Cons of EFT payments
Pros and cons of different EFT payment types
Automated Clearing House (ACH)
Plooto
PayPal
Venmo
Stripe
Square
EFTs and international payments
Using EFTs to improve cash flow: A real life example
What are B2B EFT payments?
FAQs
What are EFT payments? And when should you use them? ›
EFTs can be used to withdraw cash, pay bills, send money to a friend or family member, receive payment from an employer, or make a purchase using a debit or credit card. An EFT transfer can take anywhere from a few seconds to a few days to process.
What is the purpose of EFT payment? ›EFT stands for electronic funds transfer. It is an electronic payment system that enables individuals or businesses to transfer funds from one bank account to another. EFT payments are secure and more efficient than traditional payment methods such as cash or checks.
What are the disadvantages of using EFT? ›- Risk of Fraud: Despite security measures, cybercriminals may attempt to intercept sensitive data during transmission.
- Technical Issues: Server crashes or network issues can delay transactions or lead to processing errors.
In general, EFTs are a very safe and convenient way to send money and receive payment. Yet it remains possible that you'll experience an unauthorized transfer, whether due to fraud or an error. Use these strategies to help protect yourself when using EFTs: Check your statements and accounts frequently.
What is the main benefit of EFT? ›EFT payments are a convenient and efficient way of sending and receiving money electronically, without the need for physical checks, cash, or wire transfers. EFT payments can offer you faster and cheaper transactions, enhanced security and convenience, and simplified accounting and record-keeping.
What can EFT be used for? ›Emotional freedom technique (EFT) is a method some people use to help manage emotions and troubling thoughts. They may also use it to lower their stress and anxiety. For example, EFT may help calm you if you're feeling angry. Or it may help ease your thoughts if you're worried about something.
Who benefits from EFT? ›When to Use EFT. There are times, though, when you may benefit from using this tapping technique with a mental health professional—especially if you have been diagnosed with anxiety, depression, complicated grief, PTSD, or another mental health condition.
Which is safer EFT or wire transfer? ›Security. Both wires and EFT payments offer secure transfer systems, but EFTs have a slight edge in this area.
Why would a person use online banking for EFTs? ›Flexibility: Many forms of EFTs can be done online, enabling business to be conducted pretty much anywhere. A person doesn't necessarily need to visit an actual store or visit a bank to withdraw money or conduct other banking transactions.
How long do EFT transfers take? ›How long does it take for an EFT (electronic funds transfer) transaction to process? EFT transactions typically take 48 – 72 hours to settle.
What is the safest form of electronic payment? ›
Credit cards, debit cards, digital wallets, and bank transfers are the safest ways to pay online.
Do EFT payments have fees? ›Sometimes a bank will charge a small fee—about $3—for sending an EFT to a different bank, but payroll direct deposits are generally free. There is usually no fee for receiving an EFT payment.
What is the safest electronic money transfer? ›The safest way to transfer money to someone is to use a direct wire transfer between banks or a payment app with security features. Beware of scams with either method since getting your money back is hard or may be impossible.
What is a disadvantage of an EFT? ›For disadvantages, international wire transfers (a form of EFT) can be expensive to send and receive, with fees from the originating and receiving banks, possibly intermediary bank fees, and miscellaneous fees like investigation fees if the wire transfer is lost.
What is an example of an EFT payment? ›Direct deposit, credit card transactions, ATM transactions, electronic checks and phone payments are all types of EFT payments.
Is EFT the same as bank transfer? ›Because EFT is an umbrella term, it covers a broad range of payments, including telephone-based transfers, computer-based transfers (i.e., online), ATM transfers, Direct Debit, bank transfers, point-of-sale transfers, e-checks, and so on.
What is the goal of EFT? ›This focus leads therapist and client toward strategies that promotes the awareness, acceptance, expression, utilization, regulation, and transformation of emotion as well as corrective emotional experience with the therapist. The goals of EFT are strengthening the self, regulating affect, and creating new meaning.
What is the difference between EFT and ACH? ›The terms “ACH transfers” and “EFT” are not interchangeable, but they are strongly related. ACH transfers are a type of EFT, and EFTs include ACH transfers but are not limited to them. While wire transfers are processed individually in real time, ACH transfers are settled in batches.
Why did I get an EFT payment? ›An Electronic Funds Transfer (EFT) or a direct deposit allows companies to streamline their payables and receivables for everything like invoices from service providers to employee salaries through easy payments between different users' bank accounts in Canada.
How does EFT actually work? ›How does EFT tapping work? Similar to acupuncture, EFT focuses on the meridian points — or energy hot spots — to restore balance to your body's energy. It's believed that restoring this energy balance can relieve symptoms a negative experience or emotion may have caused.