A Beginner’s Guide to Electronic Funds Transfer (EFT)

We are in a world with digital money and no cash in hands. Electronic funds transfer (EFT) is becoming tremendously popular and widely accepted in this digital wallet scenario across the globe. Smartphones, digital wallets, and digital payments are revolutionizing the world with innovations.

Electronic funds transfer offers immense benefits to individuals and businesses; they are secure, safe, speedy, convenient, easy to use, reliable, and exceptionally cost-effective. All these unique features have made electronic funds transfer the primary fund transaction method.

EFT allows users to transfer money from one bank account to another without any physical money exchanges. Direct deposit is one of the widely used EFT methods. So companies usually prefer to use this method to deposit payroll directly to an employee’s bank account.

However, we have several other EFT funds transfer methods such as credit card, ATM, Fedwire, and Point-of-Sale (POS) transactions. These all take place using an electronic terminal. Hence, any funds transferred using an electronic terminal are considered as Electronic Funds Transfer.

The EFT is popularly used for credit and debit transfers, payroll payments, mortgage payments, etc.

How does an Electronic Funds Transfer (EFT) work?

EFT works based on the Automated Clearing House (ACH) network, one of the largest and most secured, reliable payment systems globally. Banks process the transactions by using the ACH network that connects all the U.S. financial institutions.

The ACH network-based transactions operate as a batch processing system. They are handled as batch processing throughout the day. According to NACHA, “the ACH network handles around 24 billion EFTs each year, accounting for more than $41 trillion transferred.”

However, for EFT-based fund transactions, the beneficiary party needs to provide the following information:

  • Bank name

The EFT is greatly appreciated because of its paperless transaction nature, such as zero requirements of checks, stamps, envelopes, or paper bills that are antiquated. EFT has also reduced administrative costs, increased efficiency and security, and simplified recordkeeping.

Various Types of EFTs

Well, there are a variety of EFT methods.

  • Direct deposit: As mentioned above, this method is most utilized by businesses to pay employees.

EFTs are most popular and, again, widely being accepted across the globe. They are simple with one-time setup processing, save processing fees, and convenient to use! So your go-to can be EFTs.

PayCircle offers technology-driven solutions to industry leaders, helping them streamline payments, transaction settlements, and asset management globally.

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