What Are EFT Payments? A Guide to Types & Business Benefits

Table of Contents

1. Examples of EFT Payments
2. How EFT Banking Works
3. How Long Do EFT Payments Take?
4. EFT vs. ACH
5. EFT vs. Bank Transfer
6. EFT’s Importance in Payment Processing

Key Takeaways

• What is EFT? Electronic Funds Transfer (EFT) refers to digital payment transactions, including direct deposits, online bill payments, and card transactions, that move money electronically between accounts.
• Types of EFT Payments: EFT includes ACH transfers, debit/credit transactions, wire transfers, and peer-to-peer payments.
• EFT Processing Times: EFT payments generally take 1-4 business days, though processing can vary.
• Benefits of EFT: EFT provides faster, more secure transactions, better cash flow, and easier recurring payments for businesses.
• EFT vs. ACH: ACH is one type of EFT, primarily used for bank-to-bank transfers in the U.S.
• EFT’s Role in Payment Processing: EFT is integral to digital payment processing, helping businesses streamline transactions and reduce credit card processing fees.
• Paystand and EFT: Paystand offers a platform to handle EFT payments efficiently, helping companies reduce costs associated with credit card transactions.

Electronic payments are not just a convenience—they’re necessary for efficient business operations and personal transactions. Electronic Funds Transfer (EFT) has become the backbone of the Canadian payment industry, enabling secure and swift movement of funds between banks, businesses, and individuals without the need for paper checks or cash exchanges. Covering a wide range of transaction types, from direct deposits to online bill payments, EFT transforms how we manage and transfer money.

This guide explains the fundamentals of EFT payments, how they work, and why they’re essential in today’s financial ecosystem.

What are EFT Payments?

EFT, or Electronic Funds Transfer, is the digital transfer of money between banks, businesses, and individuals. It covers many common types of digital transactions, such as ACH transfers, direct deposits, debit/credit payments, and online bill payments.

Advantages of EFT Payments

• Enhanced Security: EFT transactions are regulated under the Electronic Fund Transfer Act, which protects users from unauthorized transfers.
• Speed: EFT payments are faster than traditional paper checks, cutting down on mail delays.
• Recurring Payment Options: Businesses can set up EFT payments for automatic billing cycles, improving cash flow predictability.
• Flexibility: EFT enables remote payments, allowing businesses to operate globally without geographical limitations.

Examples of EFT Payments

EFT payments include a variety of digital transactions, from direct deposits to debit/credit card transactions and online bill payments. A common example is direct deposit, where payroll funds are electronically transferred into an employee's account.

How EFT Banking Works

In an EFT payment, the payer initiates the transfer through a digital platform (like online banking). The payer’s bank then sends the transfer to the payee’s bank, where the account details are verified before funds are credited. Common uses of EFT payments include paying employees via direct deposit or sending ACH transfers for vendor payments.

How Long Do EFT Payments Take?

EFT processing times vary but typically range from 1 to 4 business days. Factors affecting speed include bank processing times, weekends, holidays, and the type of EFT transaction.

What is the Difference Between EFT and ACH

While ACH (Automated Clearing House) payments are a type of EFT, they specifically involve bank-to-bank transfers within the ACH network, regulated by NACHA in the U.S. ACH payments are popular for payroll, recurring bills, and peer-to-peer transfers.

In Canada, EFT is commonly used and covers various types of transactions, not just those limited to a specific network like the ACH in the United States. EFT in Canada broadly covers inter-bank transactions, this includes payments made through Canadian financial institutions and the clearing systems.

So, while ACH and EFT both handle electronic fund transfers, EFT in Canada is a more general term, encompassing a wider range of transactions than ACH in the U.S.

EFT vs. Bank Transfer

Although all bank transfers are EFTs, not all EFTs are bank transfers. EFTs encompass various digital payment methods, including card transactions and online payments. However, bank transfers refer to direct account-to-account transfers within or between banks.

EFT’s Importance in Payment Processing

As part of the broader payment processing landscape, EFT plays a key role in streamlining business transactions and reducing operational costs. For Canadian businesses, EFT  offers a faster, more cost-effective alternative to traditional payment methods, reducing dependency on credit cards and their associated processing fees.

EFT payments have revolutionized financial transactions by making payments faster, safer, and more convenient for both businesses and individuals. From payroll deposits to vendor payments and beyond, EFT offers an adaptable solution for a variety of financial needs. By leveraging the advantages of EFT—such as enhanced security, speed, and global flexibility—businesses can streamline operations and reduce costs, gaining a competitive edge in an increasingly digital world. Embracing EFT is not just about adopting a payment method; it’s about building a future-ready approach to financial transactions.

If you're ready to see how ACH payments and other digital solutions can optimize your accounts receivable, explore Paystand’s Canadian offerings.