Have you ever sent or received a payment from a client or customer online? If so, you have engaged in an Electronic Fund Transfer (EFT).
Electronic fund transfers are fast becoming a norm in our Canadian banking and payment system. If you still spend hours at the bank waiting to deposit or clear funds from a cheque, then chances are you can save time with electronic transfers by understanding how to digitize your business payments.
Those of you that have dealt with EFT payments before probably know that it can be quite complicated to set up in the beginning, especially when using the banks’ EFT systems for business transactions.
In this guide, we will explain how EFT payments work and how you can get started without complications.
Hint: There’s an easier way to send and receive EFT payments for Canadian businesses! With MazumaGo, you can get set up and make your first EFT transaction today. Keep reading to find out how.
1. What is EFT?
EFT is an acronym that stands for Electronic Funds Transfer. It can also be called electronic banking or e-cheque since it does not involve the use of traditional paper cheques. It is the digital transfer or exchange of money from one bank account to another, either within a single financial institution or multiple institutions via a computer-based network.
EFTs exist in various forms, such as direct deposits, ATMs, debit cards, electronic cheques, mobile wallets, personal computer banking, and a host of others.
In Canada, the most common form of EFTs is direct deposit payments. With direct deposits, you allow an organization to withdraw funds from, or deposit money into your bank account at a given time. This means you can automatically transfer money online to anyone within Canada from the comfort of your home.
Similarly, you can set up direct deposit payments for recurring expenses, such as payroll, utilities, and others. At a designated date, your account is automatically debited or credited for a set amount. There is no need for you to go through the stress of refilling forms or having to process these payments manually on a daily, weekly, monthly, or even yearly basis.
2. How does EFT work?
To initiate an EFT with another party, you first need to collect their banking details, called routing numbers, before you can send any money. These details include an institution number, an account number, and a transit number.
With MazumaGo, we simplified the process to send and receive EFT payments. You can skip the process of manually collecting and entering routing numbers. Simply send payment requests to your contact’s email address and allow them to connect their bank account by logging in with their online banking details.
3. What are the advantages of EFT?
SIMPLICITY OF TRANSACTIONS
First, as opposed to the manual process of physically clearing cheques, EFT is less time-consuming and much simpler. You can easily make a transfer from the comfort of your home, office, or anywhere in the world as long as you have a Canadian bank account. Gone are the days of standing in long queues at the bank waiting to confirm if your cheques have cleared. You can also do away with the stress and paper trail involved with printing, filing, signing, stamping, and all the other processes involved with cheques before eventually mailing them. Now, your payment is just a click away.
EFT also saves time due to faster transaction processing. Your payment can begin processing the same day it was sent. Within 2-3 business days, your transaction will be deposited into the destination account. That’s almost 3 times as fast compared to cheques, which take an average of 7 to 10 business days to clear!
Similarly, EFT is cheaper compared to the manual process of clearing cheques. You do not have to pay for paper or stamps, nor waste extra time and money on trips to the bank. Most importantly, are the reduced bank fees. EFTs cost less or sometimes nothing at all. Not only that but, you do not have to pay for a bounced cheque and you can do away with a host of administrative expenses and headaches.
The most impressive feature of EFTs is the security factor. With EFT direct deposits, money is moved directly between the debiting account and the receiving account, and communication is limited to the bank systems of the sender and receivers’ bank institutions. There is no third-party interference or risk of fraud.
According to the 2019 AFR Payment Fraud and Control Survey by JP Morgan, 70% of businesses reported being exposed to cheque fraud while 43% of these businesses reported financial losses related to financial fraud.
Thankfully, with EFT, you can eliminate this risk altogether. MazumaGo business payments are processed at bank-grade security. Our partnership with BMO allows MazumaGo to process payments via EFT direct bank transfers between any Canadian banks. As a registered money services business, MazumaGo is regulated and trusted by FINTRAC Canada.
The Financial Transaction and Report Analysis Centre of Canada (FINTRAC) and the Canadian Revenue Agency (CRA) regulate all Canadian EFT transactions. These bodies are tasked with detecting frauds of all kinds, the prevention, and deterrence of money laundering, and the financing of terrorist activities. All EFT reporting is done with a shared reporting process that simultaneously reports electronic transactions to both the FINTRAC and CRA. FINTRAC also obligates that transfers exceeding $10,000 must be reported, making it difficult to fund criminal and terrorist activities.
4. What is the difference between EFT and ACH?
ACH stands for Automated Clearing House. It is usually regarded as the backbone of the North American payment system. ACH is a network of banks with batching transactions between them. It is used to reconcile and exchange batches of payments.
ACH is a form of EFT that deals with electronic transactions from one financial institution account to another. It is processed by banks through the Automated Clearing House regulated by NACHA, the National Automated Clearing House Association of the United States.
5. How long does an EFT take to process?
It can take from a few hours to about 3-4 days to process a transaction. The duration depends on the type of payment, the value of the payment, and your EFT provider. Generally, high-value EFT payments tend to take longer, as there are additional security measures in place. For example, when you make a high-value EFT payment, the funds in your account need to be verified prior to withdrawal in order to avoid NSFs.
With MazumaGo, you can send and receive no-limit EFT payments within 2-3 business days. You can easily monitor the progress of your transaction in real-time and be notified the moment your customer pays the invoice.
Get started with EFT today
EFT payments are a convenient, secure way to process payments online. Canadian businesses can benefit from the simplicity and time savings of switching to EFT.