Online Payments

Online Payments

Everything you need to know about EFT banking

EFT payments

Digital disruption has overhauled age-old processes in every industry to be more customer-centric, user-friendly, connected, and, above all, digital. For the financial industry, digital technologies such as electronic transfer funds, or EFT banking, helps banks meet rising consumer expectations and smooth over omnichannel experiences. Today, we’re focusing on the rise of electronic fund transfers (EFTs)

A 2018 trend report from Payments Canada found that while the number and dollar value of payment transactions using cheques and cash continues to decline over the years, debit, credit, and electronic fund transfers (EFTs) have seen an upswing. 

EFT banking stands for electronic funds transfer and is something that many of us now take for granted as a new norm. It’s the expectation that your salary was automatically deposited into your bank account. It’s a quick payment of your credit card or monthly bills online. It’s the tap of your debit card when you purchase your groceries or a coffee.  

In this blog post we will consider: 

  • What does EFT mean in banking?
  • The types of EFT payments
  • The difference between EFT and ACH
  • Pros and cons of electronic funds transfer
  • How to set up and manage EFT payments
  • Innovative EFT banking with VoPay

What does EFT mean in banking?

EFT banking is also known as electronic banking and is a type of online payment. As the name would imply, it’s the digital transfer of funds from one account to another without ever requiring a bank teller to assist or to create a paper trail. It allows businesses to transfer and collect payments between vendors and suppliers quickly and efficiently. EFT payments can be used instead of cash and paper cheques.   

The types of EFT payments

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

Here are some main types and use-cases of EFT payments:

  • 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 

Likewise, there are pay-by-phone systems, direct payments between buyer-seller businesses, and electronic cheques (or e-cheques), which we’ll discuss in our next section. 

The difference between EFT and ACH

ACH payments are also referred to as e-cheques or electronic cheques. They are a type of EFT or electronic payment and are any EFT payments that go through the Automated Clearing House (or ACH) Network. 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 2018, the ACH Network handled nearly 23 billion EFTs, totalling a value of over $51.2 trillion. 

Pros and cons of electronic funds transfer

EFTs have many advantages, including:

  • Less costly than processing credit cards and cheques
  • Faster, more efficient transfer of funds
  • More secure than carrying cash and cheques (bank information on the bottom)
  • Easy to use 
  • Digitally connected 
  • Easily automated 

Some of the disadvantages of shifting business and personal banking processes to online systems are the same as upgrading any kind of process. It requires some time, research, and due diligence to look into the security features, cost-benefits, and efficiency and effectiveness of EFT payment options. Likewise, other systems such as automated billing, invoicing, and accounting systems may require updating and organizing digitally.    

How to set up and manage EFT payments

In order to accept and initiate EFT payments as a business, you will require permission and bank account information from the customer, business or vendor. If you’re using your bank account, you will need to have your customer, business or vendor fill out a contact and account information form. Once you have this information, you can set up the EFT payment via online banking. 

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. Setting up recurring EFT payments is a great way to avoid having to set up payments and collect financial information. 

Innovative EFT banking with VoPay

VoPay’s payment solution, for example, allows businesses to accept, collect, and send EFT payments in a secure and efficient way. For our clients, that means the elimination of costly NSFs and slow cheque processing times. Our technology validates bank account information for EFT payments without ever seeing the customer, business or vendor’s bank account or financial details. 

Learn more about how VoPay is digitizing bank payments.

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Online Payments

Benefits of Innovation in B2B Payment Solutions

b2b payments

Elevating an accessible Canadian business payments landscape

Traditionally the B2B payments space has lacked innovation, with digital solutions primarily focused on serving the B2C market. Recent research from Ernst and Young LLP (EY) and Payments Canada supports this, outlining that Canadian businesses are currently spending up to $5 billion on processing payments. This overspend is mainly due to issues prevalent in the payments industry such as a lack of transparency, traceability and available data on payments processing.

Positive changes are happening in Canada’s B2B payments landscape, with FinTechs now challenging the status quo and modernizing payments by introducing new technologies. This includes open APIs that eliminating some of the payments industry’s key pain points. However, a recent survey by Payments Canada outlines that over 80% of Canadian small businesses still want more payment options to be available and one of the most important factors for these businesses is safety and security.

Reduced Costs and Enhanced Security with Business to Business Payments

With this in mind, what are the key benefits of digitized payments for B2B businesses today?  

New automated solutions, such as account-to-account transactions which enable B2B customers to make online payments without needing to handle a credit card, can cost 80% – 90% less than traditional credit card payments which typically place a heavy burden on a business’ profit margins. Moreover, with digital payments businesses can experience significant cost savings compared to traditional methods such as cheques, which incur high processing and material costs not to mention postal delays and the numerous security implications.

Recent research on global SMBs found that 59% identified security as a critical differentiator when selecting a Payment Service Provider. Digital bank account payments address security concerns by removing the vulnerability associated with providing credit card information and all transactions are completed with clear traceability.

Increased Efficiency and Transparency Through Payments Innovation

Innovation in the payments industry has enabled businesses to gain insight into the end-to-end transaction lifecycle and make payments in real time. This digitization of payments opens the doors for businesses to make faster payments and access much richer and more comprehensive data analytics. This can assist businesses by improving cash flow insights and predictability by identifying areas which drain resources and allowing them to reallocate where needed and streamline operations. 

Finally, payment solutions are no longer being designed with one party in mind and instead businesses are able to reap the rewards of increased efficiency and transparency whilst also being able to empower customers with quick and frictionless payment flows.

Overall, the B2B payments industry is only going to continue to evolve as we enter 2020 and at VoPay we hope to see more B2B businesses embracing the many benefits that these innovative solutions are finally affording to them. 

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