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Electronic Fund Transfer (EFT) refers to any fund transfer initiated electronically. EFT covers transfers and transactions made digitally through methods like the ATM, magnetic tapes, an electronic terminal, computer, or telephone.
Many transactions we do today – withdrawing cash from ATMs, transferring money online, and receiving your paycheck through your bank account – are all EFT transactions. With EFT, people, businesses, and the government don’t have to rely solely on cash and check transactions to move and exchange funds.
Here’s a list of the most common EFT payments used today:
1. Debit and Credit Card Purchases
For purchases made by debit or credit, the payment information is digitally transmitted to the issuing bank by the seller. The bank approves and finalizes the payment, which may take a 3-5 days for credit transactions to clear. Debit transactions settle in a speedier 24 hours
2. Wire Transfer
Businesses usually use wire transfers to transfer funds directly from their bank account when the transaction, which is useful for large sums or when making cross-border payments. Wire transfers can occur internationally or domestically.
3. Bank Transfers
Bank transfers send money directly between bank accounts. An example is an ACH (Automatic Clearing House) transfer that’s executed through the Automated Clearing House Network of financial institutions. Businesses can accept ACH payments, which may take 1-3 days to settle. Same-day ACH may require an additional fee.
4. Digital Wallets
Online payments made directly through digital wallets can occur nearly instantly. Digital wallets store payment information digitally and are commonly used for convenience and security.
5. Automated Teller Machines (ATM) Transactions
ATMs act as self-service banking units that can allow transfers between different types of accounts.
EFT comes in different forms, but these transactions have common features, such as the following:
Paperless Processing
Using EFT makes people and businesses less dependent on traditional payment methods like cash or check. As a result, completing transactions incurs less paperwork, fewer processing delays, and lower administrative costs.
Reliable Recordkeeping
Electronic transfers leave a clear audit trail with detailed records of the transactions to facilitate recordkeeping. Catch fraud and errors easier with EFT payments.
Encryption and Authentication Protocols
Electronic fund transfers use encryption and authentication to keep transactions secure and confidential. Standard protocols like Secure Sockets Layer (SSL) and Advanced Encryption Standard (AES) or payment card data security standards make sure companies store and process data securely. Effective security measures ensure the integrity and security of the transaction.
Most types of EFT process faster and cheaper than other payment methods, yet are also widely accepted. Some types of EFT allow fund transfer nearly instantaneously, allowing you to pay merchants and move money faster compared to traditional methods. Digital methods enable businesses to pull payments directly from customer accounts, which also allows funds transfers to be finalized faster.
Compared to traditional payment methods, EFT systems are more secure because they employ encryption and authentication protocols to reduce fraud or unauthorized access.
Most companies use EFT when automating payments. Automation reduces payment errors and the risk of fraud by offer tighter controls and reducing required manual intervention.
Businesses offering and using electronic payment options can attract customers and increase sales while smooth payments facilitate a good relationship with vendors.
EFT provides an efficient way to move funds quickly and securely. Automating EFT processes and making it part of your payment workflow allows you to eliminate manual steps, expedite invoice processing, reconcile accounts faster, and stay on top of all your payables.
Start optimizing your payment process to reduce the risk of fraud and error, cut costs, make payment transactions easier, and maximize rebates and discounts. Leverage SoftCoPay to create an efficient and secure payment workflow to manage all EFT transfers as well as other payment types.