EFT payments: meaning and types of EFT

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 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 characterise 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.

electronic payments are also called ETF.

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. Direct deposits can be set up by companies to pay salaries, for example.

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.


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 who 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. 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 their own type of automated clearing house. They are responsible for clearing and settling electronic payments. The first ACH system was Bacs, 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 scheme, and they also use different names to designate them. In Portugal, for example, the ACH system is called SIBS.

Online payments considered ETFs

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 a 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 10pm, for example, it might take a day longer for it to clear.

Can you cancel a 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.

Imburse 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, Imburse allows you to fully enhance your payments system with no complications. Reach out to our team below to know more or request a free demo.


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