If you run a business or work in the payments side of your company, you probably deal with EFTs on a daily basis. Electronic payments have become a commodity that is present in our day-to-day lives. They are used by companies and individuals to process a wide range of payments, from e-cheques to ATM transfers.
What Does EFT Mean?
EFT stands for Electronic Fund Transfer and represents the electronic movement of funds from one bank account to another. This transfer can happen within the same financial institution or across different institutions, always without the direct intervention of bank personnel. As opposed to paper checks or cash, EFTs are fully processed through an electronic network.
Note that EFT is a term and not a type of technology. Thus, it is only used to characterize types of payments, and it isn’t actually comparable to any national or cross-border payment technology. Each country has its national payment technologies used to process EFT payments.
The Electronic Fund Transfer Act (EFTA) was passed by the US Congress in 1978, following the growth of ATMs and electronic banking. It was aimed at protecting customers from errors derived from electronic payments. After this legislation was enacted, EFTs started to grow globally and at full speed.
What Are the Types of EFT Payments?
EFT is an umbrella term that englobes an extensive range of electronic payments, including:
Direct Debit
A type of Recurring Payment set up by the payee (usually a company) in which the monthly payment is automatically transferred to the payee’s account. Most often used for paying bills or subscriptions.
Direct Deposit
A type of Recurring Payment set up directly by the payer, in which the monthly payment is automatically transferred to the payee’s account on a recurring basis. For example, direct deposits can be set up by companies to pay salaries.
Automated Teller Machine (ATM) Transfers
Used to make deposits and withdrawals, but also to transfer funds or simply to check your bank account balance.
Mail Order/ Telephone Order (MoTo)
Functions just like a regular one-off electronic transfer, except that this one is initiated on the phone or via email. The payer provides their bank details over the phone or via email, and the payee initiates the payment.
E-Checks
The digital version of a traditional paper check. The payer writes the e-cheque electronically and sends it to the payee, who then deposits it in his account. This all happens via a computer or smartphone.
Wire Transfers
Often used to send larger sums of money to payees overseas. The payment is processed via a global network of banks that support this wire system.
Debit or Credit Card
Debit or credit card payments are typically the most common and most used by the general population. It can include any purchase made online via a company’s website.
How Is an EFT Processed?
Electronic Fund Transfers are processed via Automated Clearing House (ACH). Each country has its own type of automated clearing house. They are responsible for clearing and settling electronic payments. The first ACH system was Bacs, which was set up in the UK in 1968. In the United States, ACH Network is the national Automated Clearing House used to process electronic payments. Other countries have their own clearing and settling schemes, and they also use different names to designate them. In Portugal, for example, the ACH system is called SIBS.
What Is the EFT Processing Time?
The processing times for EFT payments depend on the type of payment that is actually in question. Usually, it can take anywhere from one to four days for an EFT payment to clear. Wire transfers take up to two days only, whilst Bacs payments take three working days.
EFT payments can typically only be processed on business days, and there are cut-off hours as well. If you make a payment after 10 pm, for example, it might take a day longer for it to clear.
Can You Cancel an EFT Payment?
You are unable to stop a payment after you initiate it and must contact the payee should you want a refund. If a payment is scheduled for later, you can stop it three working days before the process date by calling or notifying your bank. You can contact your bank if the payment was sent to the wrong account, as they should be able to reverse the transaction.
Duck Creek Payments connects you to the entire payment ecosystem, so you can process any type of payment you want using payment schemes from anywhere in the world. Whether you are a business that is looking to scale or an established financial company looking to improve your operations and enlarge your customer base, Duck Creek Payments allows you to fully enhance your payment system with no complications. Reach out to our team below to know more or request a free demo.