This article covers all you need to know about Electronic Funds Transfer (EFT) Banking, including:
- The Rise of EFT Banking
- What Does EFT mean?
- The Types of EFT Payments
- Pros and Cons of EFTs
- The Difference Between EFT And ACH
- How to Set Up and Manage EFT Payments
The Rise of EFT Banking
Electronic payments, aka digital payments, have increasingly become a more common way to pay. They are a faster, safer, and more convenient option. As digital disruption continues to overhaul the age-old processes in every industry, payment methods are more connected, user-friendly and customer-centric.
The global EFT Market is expected to reach a value of USD 103.2 Billion by 2028, and North America is leading the pack.
A 2021 trend report from Payments Canada found that while the number and dollar value of payment transactions using cheques and cash continues to decline, debit, credit, and electronic fund transfers (EFTs) have seen an upswing.
What Is An Electronic Funds Transfer?
What used to be done in cash or paper cheques can now be done digitally. Essentially an EFT is the digital transfer of funds from one account to another. This is done without requiring a bank teller to assist or create a paper trail. It allows businesses and consumers to transfer and collect payments between vendors and suppliers quickly and efficiently.
It is running on rails. Payment rails, that is. Whether it is the tap of a debit card when you purchase your morning coffee or the automatic monthly salary deposit into your bank account. Even the scheduled payment of your internet bill online. Payment rails are the platform that moves money from payers to payees.
EFT Payment Rails
Today, most of Canada’s electronic payments are happening via Payments Canada’s batch-based EFT system, which runs over the Automated Clearing Settlement System (ACSS). And while this system works, there is no doubt businesses are spending much too much time, energy and dollars on reconciling payments. This is why Payments Canada’s real-time rails are causing such a stir.
“With the RTR, clearing and settlement will occur instantly, the transaction limits will be much higher than today, and payments will be irrevocable and non-repudiable”
Amanda Holden, Canada’s Fraud and Security Intelligence Division
The Types Of EFT Payments
All Electronic Funds Transfer methods deliver a fast, reliable and cost-effective way to transact. It requires little work on either end of the transaction and, more often than not, saves businesses money. This low-effort aspect means full-time employees (FTEs) can switch focus to more significant issues while the details are taken care of electronically.
types of EFT payments and their use cases:
Direct deposit: Electronically pay invoices, bills, and employees via payroll systems
ATMs: Withdraw, deposit, check, and transfer funds between accounts electronically
Debit cards: Make purchases online and in-store, transfer funds between accounts and pay bills online, all using your debit card
Wire transfers: Make large, infrequent purchases (such as a house downpayment) quickly and electronically
Online banking: Use your phone or computer to view and transfer funds, electronically pay bills, and download financial statements
Pay-by-phone systems: Common in utility payments. The payee verbally delivers their payment information over the phone.
Pros And Cons Of Electronic Funds Transfer
EFTs deliver big benefits when it comes to B2B payments, including:
Cost Saving – eft payment solutions cost less to process. This is true of both credit cards and paper cheques.
Fast and Efficient – Less human involvement means less resource-intensive manual work
Enhanced Security – Are electronic funds transfers safe? The answer is a resounding yes. But don’t just trust us. Even the banks say so.
Digital and Easy to Use – There are no two ways about it; customers expect a fast, easy, and efficient experience. And EFTs deliver.
Efficiently Automated – Setting up automatic Electronic funds transfers to pay bills has become a breeze and a time saver for businesses and consumers alike.
While we recognize that EFTs payment methods deliver the win for almost every business today, implementing them throughout the operation will require time, research, and due diligence.
In order to succeed, companies should consider the following:
☑️ A best practice approach in change management when it comes to process improvements
☑️ Communications strategy to encourage employee and client adoption
☑️ Weighing out the benefits of partnering with a payment solution provider
The Difference Between EFT And ACH
ACH payments are also referred to as e-cheques or electronic cheques. ACH is a US-only network, a counterpart if you will to the Canadian EFT. While EFT is a blanket term for all digital transactions, ACH (Automatic Clearing House) payments are just one type of EFT. ACH is run by Nacha (National Automated Clearing House Association), which holds the weight of the American payment industry. This network is a secure system that connects all U.S. financial institutions and is quickly becoming the go-to payment method for transferring money. In fact, in 2020, the ACH Network handled nearly 26 billion EFTs, totalling over $61.9 trillion.
How To Set Up And Manage EFT Banking with VoPay
We offer a simple technology layer that enables digital enterprises to seamlessly offer secure, fast and direct EFT bank account payments.
In order for a business to collect an EFT, you must provide the banking information of the person’s account you are debiting the funds from. Using VoPay’s IQ11 EFT service, end users can provide their bank account details once by simply logging into their online banking via a payment link or embedded iFrame experience. Similar to a PAD agreement, but a modern digital version. VoPay creates a token for every transaction to protect sensitive data and save the token for future use. Businesses can collect single or recurring payments using EFT.
With this EFT payment setup, you can transfer funds from one account to another at an agreed-upon date. The amount of time to transfer funds depends on your EFT provider or your institution’s provider. (Learn more about what EFT payment processing times look like below).
More and more recurring payments have become the solution for the time-consuming manual task of following up when a payment is due; setting up recurring EFT payments is a great way to avoid setting up payments and collecting financial information.
VoPay’s direct bank payment service connects your business to all North American financial institutions allowing you to push or pull funds directly from a client’s bank account.
✅ Send and collect single or bulk payments
✅ Schedule recurring monthly payments
✅ Build custom payment flows to suit your business
Intelligent EFT (iQ11)
VoPay’s iQ11 service offers same-day EFT / ACH processing with complete visibility into the lifecycle of each transaction, as well as advanced bank account verification and reconciliations. With an added layer of data intelligence to EFT / ACH transactions, they are instant, like a credit card but with much lower transaction fees.
✅ Account Authentication
✅ Balance verification
✅ Transaction validation
✅ Express funds delivery
VoPay’s EFT payment service turns the current legacy EFT payment services on its head. Our technology validates bank account information for EFT payments without ever seeing the customer, business, or vendor’s bank account or financial details.
Accept, collect, and send EFT payments in a secure and efficient way, eliminating the costs of NSFs and slow cheque processing times.