Electronic Funds Transfer (EFT) is a digital transfer of cash through an online payment system. It is a way to move money across an online network, between banks and people. EFT payments are frequently used in place of paper-based payment methods like checks and cash to make transactions faster and safer. EFT is a broad term that includes more than online ACH bank transfers and wire transfers. It can be performed within the same bank or between banks and typically uses payment systems such as the Automated Clearing House (ACH) for ACH payments, Fedwire or SWIFT for wire transfers, or credit card and debit card networks. EFT payments are also called e-Payments because each transaction is completed online and doesn’t include paper checks in the payment process.
EFT payments can be carried out between any two accounts, whether they’re based at the same financial institution or not. The term “EFT payments” refers to a number of different electronic payment methods, including ACH payments, direct debit payments, ATMs, virtual cards, e-Checks, peer-to-peer payments, and personal computer banking. EFT payments are becoming increasingly common in B2B payments as many businesses shift from traditional paper checks towards more efficient and lower-cost ePayment methods such as ACH.
EFT payments are processed by the bank through the Automated Clearing House (ACH) network, the transfer system that connects all the financial institutions, banks, and credit unions in the US. The ACH network processes EFTs in batches, which means that transactions are accrued throughout the day and processed later. EFT payments are a speedier alternative to physical payment methods like cash and checks.
The Electronic Funds Transfer Act (EFTA) is U.S. legislation enacted in 1978 to protect individual consumers in many types of electronic funds transactions and define the roles and responsibilities of all involved parties. The Federal Reserve Board implements EFTA through Regulation E. EFT payments are protected through the Electronic Fund Transfer Act, giving consumers legal recourse if something’s amiss with a particular transaction.
