Automate your workflow with Nanonets
Request a demo Get Started

What is Electronic Funds Transfer (EFT)?


If you've ever used online banking, chances are you've used Electronic Funds Transfer, or EFT. But what is EFT, exactly?

EFT stands for Electronic Funds Transfer. It is a system of transferring money from one bank account to another without the use of paper checks, or cash.

One of the advantages of EFT is that it's relatively quick - payments can be processed and transferred within a few days. EFT is also typically cheaper than other methods of payment (such as wire transfer), and it's a convenient way to make recurring payments (such as monthly bills).

EFT payments are a safe and secure way to send and receive money. When you make an EFT payment, the funds are transferred directly from your bank account to the recipient's bank account - there's no need to worry about carrying cash or checks. Plus, EFT payments are typically backed by your bank, so you can be sure that your money is safe.

Types of EFT

There are many different types of EFT systems available. Here are some of the most common:

  • ACH (Automated Clearing House) Transfers
  • Wire Transfers
  • Credit Card/ Debit Card Transactions as EFT
  • Mobile Payments
  • Electronic Checks (eChecks)
  • Point-of-Sale (POS) Payments
  • Direct Deposits
  • Recurring Payments

EFT accounts can be checking or savings. Checking accounts allow you to write checks and use a debit card to make purchases. Savings accounts earn interest on the money you deposit.

Now that you know more about the different types of EFT and accounts, you can decide which type is right for you.

1. ACH Transfers as EFT

ACH transfer is a type of EFT, or electronic funds transfer. The ACH network is a nationwide network of banks and financial institutions that handle electronic funds transfers. When you make an ACH transfer, your bank will send a message to the receiving bank or institution telling them to move money from your account to the account of the person or business you’re paying. ACH transfers are a convenient way to move money from one account to another. 

They can be used to pay bills, transfer money between accounts, or even to send money to someone else. To make an ACH transfer, you will need the routing number and account number for the account you’re sending the money to. One thing to keep in mind with ACH transfers is that they can take a few days to process. So if you need to move money quickly, you may want to consider using a different method.

2. Wire Transfers as EFT

A wire transfer is an electronic transfer of funds between financial institutions. Wire transfers can be used to send large amounts of money quickly and securely. If you need to send money internationally, you can do so with a wire transfer. International wire transfers usually take longer to process than domestic ones (3-5 business days), and they often come with higher fees. But they’re still a secure and efficient way to send money to someone in another country.

Whether you’re sending money to family, friends, or a business, a wire transfer is usually the best way to do it. It’s fast, secure, and typically has low fees.

3. Peer-to-Peer Transfer as EFT

Peer-to-peer (P2P) payments are a form of Electronic Funds Transfer (EFT) where individuals use mobile apps or online platforms to electronically transfer money between themselves. These P2P payment systems facilitate electronic money (E-money) transactions and are becoming increasingly popular for their convenience. Examples include PayPal, Venmo, Zelle, Apple Cash, and various eWallet apps, where both the sender and receiver have accounts, enabling seamless electronic transfers.

4. Credit Card/ Debit Card Transactions as EFT

Credit card and debit card transactions are considered Electronic Funds Transfers (EFTs) when they involve the electronic movement of funds from one account to another. While paying through Card, the fees are the primary thing to consider!

5. Direct Deposits

Direct deposits refer to a type of Electronic Fund Transfer. Direct deposit requires the use of an electronic network that allows deposits to take place between banks.Typically, this transaction occurs when an employer deposits an employee's salary or wages directly into their bank account. It can also be used for government benefits, pension payments, and other recurring payments.

Benefits of EFT

Engaging in business within the modern financial landscape inevitably involves embracing electronic funds transfers (EFTs), and this integration is highly advantageous. EFTs bring a host of substantial benefits that account for their widespread popularity, including:

Convenience and Flexibility

Electronic Funds Transfers (EFTs) offer a remarkable degree of versatility, accommodating a wide range of products and serving various purposes. Whether you require swift access to cash through an ATM, streamline employee payments with ACH direct deposit, or execute an overseas wire transfer for a vendor, there's an EFT method suitable for nearly every consumer and B2B transaction.

Enhanced Security

Advancements in technology, particularly over the last few decades, have significantly bolstered the security of EFTs, benefiting both consumers and businesses. For instance, early debit cards exposed the card number through magnetic stripes, leaving transactions vulnerable to fraud. However, contemporary payment methods, such as EMV chips and contactless NFC payments, transmit encrypted codes rather than card numbers to enhance transaction security. This exemplifies the ongoing improvement in EFT safety, reliability, and protection against risks.


Various EFTs come with different fee structures, which can further vary depending on the network or provider. Generally, EFT fees are relatively low, especially when considering the advantages in terms of speed and convenience.

Ubiquitous Acceptance

While some newer EFT methods, like digital wallets, are still gaining global adoption, the majority—such as debit cards, wire transfers, ACH transfers, and ATMs—are now considered fundamental components of the global economy. Regardless of your location, industry, or specific fund transfer requirements, there's likely an EFT option that aligns with your needs.

Rapid Transaction Speed

Fundamentally, most EFTs were devised to address the challenge of swiftly and effortlessly moving money. EFTs outpace manual fund transfers by a significant margin, delivering remarkable speed and efficiency for both sending and receiving funds.

How Long Does an EFT Take?

The time for an electronic funds transfer (EFT) varies by type:

1. P2P Transfers: Can be instant or take a few minutes.

2. ACH Transfers: Typically 1-2 business days, but same-day options are available.

3. Domestic Wire Transfers: Usually same business day, up to 24 hours.

4. International Wire Transfers: 3-5 business days or longer, depending on the destination.

Factors like cut-off times, verification, and weekends/holidays can affect EFT timing. Expedited options may be available for faster transfers. Check with your bank for specifics.

Usecases for EFT

Certainly, here are the top 7 payment requirements that are commonly fulfilled through Electronic Funds Transfer (EFT) payments:

1. Employee Salaries and Wages: Employers use EFT to pay employees' salaries and wages directly into their bank accounts.

2. Vendor Payments: Businesses make electronic payments to suppliers and vendors for goods and services.

3. Utility Bills: Consumers and businesses set up EFT payments for recurring expenses like utilities (electricity, water, gas), and internet bills.

4. Loan Repayments: Borrowers use EFT to make regular payments on loans, including mortgages, car loans, and student loans.

5. Subscription Services: Payments for subscription-based services like streaming platforms, software subscriptions, and memberships are often processed through EFTs.

6. Government Benefits: Governments use EFTs to distribute benefits and payments, such as social security and tax refunds, to beneficiaries.

7. Online Purchases: Consumers make online purchases using EFT methods, including credit/debit cards and digital wallets.

Alternatives to EFT

​There are a few alternatives to EFT payments, although they may not be as ideal. For one, you could opt for a paper check. This method is a little more old-fashioned, but it gets the job done. If you're dealing with a smaller amount of money, you could also use a money order or cashier's check. These are both pretty reliable methods, but they can be a little more expensive. Lastly, you could use a wire transfer. This is usually the most expensive option, but it's also the fastest way to get your money where it needs to go.

Flow by Nanonets

Automation software like Flow Nanonets can handle the end-to-end accounts payable process and help you 10x your efficiency. You can automate your invoices, approval, and payment process. Sync data in real-time with your ERP like Quickbooks for reconcilliation, monitoring and performing analytics on your AP process.

Schedule a demo with Flow by Nanonets today:


An EFT account is an account that allows you to make electronic payments. These payments can be made from your checking account, savings account, or credit card. When you make an EFT payment, the funds are transferred from your account to the recipient’s account within a few days.

EFT payments are convenient because you don’t have to write a check or carry cash. You can also schedule payments in advance, which can help you stay on top of your bills.

When you make an EFT payment, you’ll need to provide the recipient’s bank account number and routing number. You’ll also need to specify the amount of the payment and the date you want the payment to be processed.

If you’re making a payment to a person or business you’ve never paid before, you may need to set up an account with the recipient’s bank. This can be done online or by visiting a branch of the bank.

Making an EFT payment is usually free or very low-cost. However, some banks may charge a fee for this service. Be sure to check with your bank to see if there are any fees associated with making EFT payments.

While EFT payments are generally safe, there is always a risk that your information could be compromised. Be sure to only make EFT payments to businesses and individuals you trust. Also, be sure to keep your computer security up-to-date to help protect yourself from identity theft and other online threats.

Now that you know a little bit more about EFT payments, you can decide if this is the right payment method for you.