Finance glossary

What is an Electronic Funds Transfer (EFT)?

Bristol James
5 Min

Gone are the days of writing checks and carrying around chase; Electronic Funds Transfers (EFTs) have made it possible for nearly all monetary exchanges to happen digitally. Think of EFTs as an umbrella term for many different electronic transfers; ACH, wire transfers, and even mobile payments are considered EFTs. Using digital technology, an EFT enables payments to flow seamlessly between individuals, businesses, banks, and every entity in between.

Many businesses are attracted to EFTs because they have lower costs associated with processing, take way less time to be completed, and are easy to track. The benefits felt in B2B transactions are mirrored in situations that warrant personal payments between two people as well.

EFT process and how it works

The EFT payment meaning is fairly straightforward. EFTs are often looked at as high-tech and complex, but, on a process level, these types of transactions couldn’t be simpler. Whether it’s for making a business purchase or paying a friend back for picking up the tab at dinner, an EFT takes shape when the sender initiates the funds transfer. Moving through a variety of digital channels, that request will automatically communicate with the sender’s bank and the bank of the recipient. If all the information is correct, funds will be automatically input into the receiver’s bank. At that point, the EFT is complete.

The types of EFTs

Because “EFT” is an umbrella term that encompasses many different EFT payment types, you’ll probably come across more than one. Wire transfers, mobile transfers, using your credit card at a store, and even taking money out of the ATM are all considered ETF payments. Other types of EFTs can include:

  • ACH
  • Wire Transfers
  • Mobile Payments
  • Phone Payments
  • ATM Transactions
  • Point-of-Sale (POS) Transactions
  • Card Transactions
  • Internet Transactions

Benefits of EFT

Since their inception in the 1990s, EFTs have impressively cornered the payment market. They were first used as a method of giving passive, indexed funds to individual investors, but have since asserted their dominance as the preferred form of payments in personal and business situations. This easy ascent was made possible because of the high-profile benefits that are intertwined with every electronic funds transfer.


With paper checks, it can take days or weeks for the payment process to close; they must be mailed, processed, and received by the bank before the funds are available in the recipient’s EFT account. With EFTs, payments can be finalized immediately, or usually at most within a day or two. ACH, wire transfers, mobile transfers, and the like can usually be done in minutes, making it faster for recipients to get paid and easier for senders to make payments.

Lower costs

EFTs get rid of the need to pay for postage and envelopes, greatly cutting down on the costs associated with payments. Not only are electronic payments a fantastic way to cut business expenses or manage your personal budget, but they are better for the environment, too.

Reduced risk

Any process with human involvement is prone to human error. Paper checks can be written incorrectly, sent without a signature which slows down processing time, and even recorded by the recipient’s bank teller with an error. With digital transfers, human error almost completely disappears. The computers processing EFTs won’t record numbers incorrectly or forget a step; they are programmed to do the process exactly the same every time, bringing about much lower risks of late payments, improper payments, or failed payments.


Understandably, it can be a little bewildering to send a sum of money into the World Wide Web and hope for the best, but with EFTs, the level of security is unmatched. Since they go from computer to computer, they’re very hard to intercept, tamper with, or disrupt. However, in today’s world, Cybersecurity is a valid concern. Despite financial technologies having more stringent cybersecurity protections in place, on a personal level, it’s important to verify accounts before making transfers.

At the corporate level, companies sending multiple payments and EFTs per week may invest in additional security measures, to streamline account verification and make payments with confidence.

EFT cycle breakdown

Although managing an EFT payment is relatively simple, looking at each in EFT transactions can be helpful in understanding how everything is working behind the scenes:

  1. The individual or business entity that is sending the funds – the sender – initiates an EFT through their bank, a mobile application like Venmo, or even over the phone.
  2. Once the transfer request is initiated, the sender’s bank will be alerted. At this point, the sender’s bank will electronically send the funds to the recipient’s account.
  3. After the funds are successfully received, the payment is completed.


Important payment security measures

EFT technology isn’t going anywhere, but lucky for business owners, it’s one of the safest ways to make and receive payments to date. As mentioned above, EFT transactions cut down human error-related risks and create an automated audit trail for easy safekeeping. But with advanced technologies, EFTs are getting even safer.

Depending on the nature of your funds transfer (ie. personal vs commercial), taking extra precautions when making transfers can be important. For example, when accounts payable teams are processing hundreds of invoices over a month, they may invest in a technology such as Eftsure. With our tool, businesses can prevent payment fraud, onboard and verify new vendors seamlessly with a few clicks and keep a detailed log of all necessary banking and compliance data.


  • EFT payment work has revolutionized the payment process worldwide. Vendors and buyers alike benefit from digital payment capabilities in many ways; lower operating costs, reduced business risk, and enhanced EFT transaction security are just a few.
  • There are many different EFT payment types. The EFT payment type used in an individual transaction will depend on what works best for the parties involved. Some businesses prefer ACH or wire transfers, while others have a specific payment platform they like to use.
  • By relying on technology to do the heavy lifting, EFT payments require very little human input. A buyer will simply need to fill out an EFT payment request, such as a wire transfer, and let the computer systems do the rest.
  • EFT payments are the preferred payment method for billions of people. If businesses fail to enable these types of EFT payments, they’ll get left behind in today’s digital landscape.


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