What are EFT Payments? A Guide to Electronic Funds Transfer

Jul 2, 2021

Digital payments have arrived. It’s time for businesses to not only familiarize themselves with digital payments but embrace them and understand that they are a critical factor in their growth and success. So what are EFT payments, and how do they work?

Businesses that have already switched to digital payments report the many advantages gained over traditional payment methods. Most notably, the top two are higher returns and increased convenience for staff. 

The most common electronic payment in Canada is the Electronic Funds Transfer (EFT). These online payments move money securely from account to account throughout financial institutions. More and more, payments are taking place over digital networks leading us to an increasingly paper-free banking system. This guide will look at all aspects of EFT payments and how they benefit Canadian businesses.

What are EFT Payments in Canada?

Known as the backbone of the Canadian payment industry, Electronic Funds Transfers or EFTs offer a safe and cost-effective way to electronically credit or debit accounts at any Canadian financial institution in Canadian or U.S. dollars. 

In Canada, we saw 2.9 billion electronic funds transfer (EFT) transactions worth $5.1 trillion in 2020. In other words, EFT payments are at the head of the pack when it comes to the various types of payments available.  

By eliminating the need to write a cheque or use cash to pay for a business expense, EFT payments have become useful for businesses and individuals alike. This guide delves deeper into all aspects of EFT payments and how they benefit Canadian businesses. 

Note: EFT payments are also referred to as electronic payments, eCheck, electronic banking, or electronic bank transfers. 

Types of EFT Payments

There are many different styles of electronic fund transfers, some of which consumers and business owners use daily, weekly or monthly. One main distinction for EFT banking is whether or not it requires human interaction to complete the transaction. 

For this guide, our focus will be on EFT debits/credits or eChecks:

  • Electronic Cheque/eChecks: Electronic equivalent of a regular paper cheque. Using a bank account number and routing number, the eCheck can send encrypted data to make EFT deposits. 
  • EFT Credits: Electronically pay vendor invoices, bills and employees via account-to-account payments.
  • EFT Debits: Electronically pull funds from the customer’s bank account on a single or recurring basis.  

Across their many forms, EFT transactions make up the electronic banking industry. Each of the above EFT payment types shares one common element—they’re all connected to the Canadian banking network.

Inefficiencies in current EFT payment processing

Traditionally, EFT payments are manually processed through a Canadian financial institution. The procedure is known to be labour intensive and lacks any form of tracing or visibility.

1. Manual Processing and Labour Intensive

In today’s world, EFT payment services available through banks and credit unions are either provided by an online banking service or through a file processing system. Whichever method is used, clients must manually submit the transaction. Furthermore, EFT payments then take 3 to 5 business days to clear.

The client must complete additional steps to ensure the transaction status is updated and reflects correctly on the books. Moreover, a business encounters the extra challenge when they need to collect installment payments and repeat this process weekly, biweekly, or monthly.

2. Lack of Visibility and Transparency

Similar to cheques, if a business accepts and sends payments using outdated EFT banking methods, it cannot verify any information about the payer’s bank account, ownership or availability of funds. 

They cannot predict if the payment is successful, and it can take up to 5 business days to have final confirmation. More importantly, the inability to connect existing banking systems to the business software or platform they use to manage their AR/AP will result in manual reconciliation and updating of the status of each client account. This can result in costly financial errors. 

To process EFT payments digitally, businesses must connect to a technology-driven payment gateway or EFT processor to eliminate the manual steps and allow businesses to have complete control and visibility over their payments.

How do I make an EFT payment? 

Sending an EFT only requires the recipient’s bank account information. Typical account information includes name, account number and institution/routing number. There are two parties: the sender of funds and the receiver of funds. EFT debits (decrease) one person’s account and EFT credits (increase) the other person’s account. 

Use cases:

  1. A business can send an EFT payment to a supplier, vendor or borrower. 
  2. Or, a business may give customers the option to pay their invoice or bill via an electronic funds transfer. 

Pre-Authorized Debit (PAD) Agreement Canada

Pre-Authorized Debit Agreement, or PAD, is an agreement that enables businesses to debit accounts on a single or recurring basis without getting permission each time. Payments Canada and its participating financial institutions have established terms and conditions to ensure PADs are appropriately authorized and protect against improper withdrawals.

Hence, with these agreements in place, they remove several steps from the process and help to ensure payments arrive on the expected day. PAD agreements can be in paper form or electronically embedded into the user journey.

EFT Payment Processing Times

Once a standard EFT transaction is initiated, it will follow the following timeline:

Collecting payment: T + 3 business days for funds to arrive

Sending payment: T + 3 business days for funds to arrive

Same-day EFT processing times are available for businesses that require faster receivables. It is important to remember that EFT payment processing in Canada has daily cut-off times. You can find a list of daily cut-off times HERE.

EFT vs ACH Payments

EFT is a blanket term for all digital transactions. Automatic Clearing House (ACH) is just one type of EFT. ACH, run by Nacha (National Automated Clearing House Association), holds the weight of the American payment industry.  In the U.S., ACH payments tend to be more common, much cheaper, and a bit more secure than wire transfers.

ACH connects the banks and creates a daily debit and credit tally. The ACH network processes EFTs in batches. This means transactions are accrued throughout the day and processed later. Consequently, any transactions processed through the ACH network take approximately 3 days to settle. It is important to note ACH is a US-only network.

EFT vs Wire Transfer

Introducing online transfers, where the old-fashioned concept of bank wire transfers meets the modern technology of EFT. 

Below we explore the main differences between the two payment types. 


The business owner has complete control over when the EFT payment processing occurs, enabling the payments to be debited from their client’s bank account on a particular day.


Wire transfers typically take around 3-5 business days to move money between bank accounts. EFTs are usually complete within 1-2 business days. In some cases, they are processed on the same day.


Bank wire transfers are usually costly, especially for international payments. EFTs, on the other hand, can be very cost-effective. Wire transfers are more expensive than other EFT methods and can be as high as $50 per international wire transfer. Processing costs for various payments are outlined below.


Often, a wire transfer requires taking a trip to the bank, especially for larger payments. EFT payments are completely digital through a payment facilitator. There’s no need to go to a bank or even leave your office.

What are EFT Payments? An Easy Guide to Electronic Funds Transfer

Top 4 Benefits of using EFT payments for your Business 

Bringing your payment systems into modern times benefits your business.

1. Control and Visibility

One of the significant disadvantages of using traditional paper payments is the lack of control over the payments. Businesses spend so much time waiting for: customers to review invoices, cheques in the mail and credit card transaction approval. In contrast, initiate payments from the customer and decide when the payment is withdrawn from the bank account with EFT payments.

2. Cost-Efficient 

Most online credit card processors charge 3% on every payment, which adds high costs to everyone’s bottom line. For this reason, it becomes an advantage to all when customers are provided with more ways to pay. Specifically, EFT payment processing can cost as little as $0.50 per transaction. Furthermore, EFT payment processors such as VoPay only charge a flat fee per transaction. Hence EFTs can save businesses thousands of dollars per month and add to the bottom line.

3. Flexible, Customer-Friendly Payment Options

Setting up recurring payments and deposits is quick and easy. Not to mention, your customers will enjoy the convenience of making EFT payments (especially when part of a recurring payments plan). Consider the customer only has to provide their bank account information once, and future payments are fully automated. It makes it simple and easy.

4 High-Level Security

EFT payments are sent from one bank account to another and sit at bank-level security. Consequently, businesses reduce the risk of lost or stolen paper cheques by moving money electronically. Thus, eliminating the risks associated with cheque fraud and forgery. When using payment processors like VoPay, businesses gain the added layer of security with measures already in place. 

Shifting to an online payment system can be complex; picking the right payment technology partner can help make this transition seamless.

Are EFT payments right for my business? 

The 5 questions to ask yourself to see if EFT payments will work for you:

  • Does your business currently require recurring payments?
  • Do your customers currently pay by paper cheques?
  • Is there a significant proportion of your customers currently pay by credit card?
  • Would the processing fees for EFT save you money compared to credit card fees?
  • Could you convert your credit-card-using customers to pay by EFT instead?

EFT payments boost your business if you:

  •  Pay employees, suppliers and utilities
  •  Collect payments from customers
  •  Need to improve security by reducing lost, stolen and forged cheques
  •  Wish to reduce late payments and associated charges
  •  Moving from manual systems to electronic systems
  •  Reduce credit card costs and operating expenses

5 Industry-specific benefits

1. Lending/LMS

Optimized cash flow through faster payments and collections 

2. Real Estate

Streamlined back-office operations through reduced NSFs and delays in closing

3. Market Places

Increase revenue with reduced merchant fees and decreased chargeback risk

4. Crowdfunding

Improve payment security through verified users and data tokenization

5. Property Management Service

Collect recurring monthly payments and reduce returns by utilizing advance EFT account verification services

VoPay’s EFT Payment Solution 

Not all EFT payments are created equal. VoPay’s EFT payment solution does it with speed, transparency and traceability. Accept, collect and send digital EFT payments to or from any financial institution across Canada. Forget the traditional process requiring manual submission and complicated file processing from the payee to initiate the setup and automate them instead. Hence, remove the friction and the inefficiencies associated with manual processing and gain a completely digital experience by integrating our API into your system.

VoPay offers two types of EFT Payments. Standard EFT and data-driven Intelligent EFT (iQ11 same-day EFT). Businesses benefit from faster transaction speeds and lower costs from either solution.  

VoPay EFT Payments Canada

Same-Day EFT Payments Canada

Faster payments, full payment traceability, and eliminating costly NSFs and slow cheque processing times for our clients. Utilizing Open Banking payment technology, VoPay can securely validate bank account information for EFT payments without ever seeing the customer, business or vendor’s bank account or financial details.

Process one-off or recurring EFT Payments through the VoPay API or portal, with transactions clearing as quickly as the same day. VoPay can fully support EFT transfers for Canadian merchants and enable electronic transfers using ACH for cross-border transactions.  

See our previous comparison chart for a summary of features: Bank EFT vs VoPay EFT Comparison.

VoPay payment gateway dashboard

By partnering with VoPay, businesses can leverage an easy-to-implement solution to debit or credit Canadian bank accounts electronically. We work with individual businesses to create the desired payment flows and processing needs that enable rapid scaling and seamless payments.

Contact our payments team today to schedule a demo and learn more!

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