Payment Systems

Electronic Funds Transfer (EFT): An Introduction and Guide [2023]

Unless you pay for all your expenses in cash, cheque or bank card, chances are that you’ve used an EFT payment without being aware of it.

Nowadays, most of the modern world runs on electronic funds transfers.

What are they, however? How do they apply to the business world? If you’re wondering what the answers are to these questions, keep reading.

This guide covers everything you need to know about EFT payments, how they are used, and what kinds of benefits these payment methods bring to Canadian businesses (hint – they are extensive).

To wrap it up, we’ll explore options to figure out what type of EFT solution suits your needs.

How Are EFT Payments Handled in Canada?

Online payments are the new normal for modern finance.

The data is in – the future is paperless.

EFTs offer a secure and affordable way to send digital payments between financial institutions. Canada has embraced this brave new world, so much so that 10.8 trillion dollars[1] worth of online transactions were processed in Canada in 2020 alone!

EFTs remove the need to write out a cheque or drive to a bank to process a transfer. Digital transactions have evolved from being a novelty to becoming an essential part of the business.

According to Payments Canada, 68% of firms polled state that digital payments made their operations more efficient, 40% reported an increase in customer satisfaction, and 32% reported an improvement in supplier satisfaction[2] .

EFTs are sometimes referred to as electronic payments, eChecks, electronic banking, or electronic bank transfers.

How Many Different Types of EFTs Are There?

There are many different types of electronic fund transfers.

With the widespread and regular adaptation of electronic payments, countless transactions are processed daily, weekly and monthly. With the different methods used in modern banking, the biggest difference to note is whether the transactions require human intervention to resolve.

In this article, we’ll focus on the main methods used in Canada: EFT debits and EFT credits.

  • EFT Credits: Credits push funds into a bank account. EFT credits allow you to pay invoices, settle bills, and compensate employee wages by making payments directly to the bank accounts.
  • EFT Debits: Debits pull funds from a bank account. EFT debits allow you to directly take funds from a customer’s bank account on a one-time or recurring basis. Loan, rent payments, insurance premiums, phone bills and subscription services are common use for debit transactions.

EFT may come in many different forms, but they are all essential for the modern electronic banking industry. Canadian EFTs are versatile, as these transactions can be processed in both Canadian and US dollars.

How Do You Make An EFT Payment?

To send EFT payments, businesses need a payment gateway or an EFT processor. These digital platforms remove the historical manual processing, allowing companies to have visibility and direct control over their transactions.

When set up, the only thing needed to send payments will be the recipient’s bank account information. Typically, this is comprised of the payee’s name, the account number and the institution/transit number.

Two parties are involved during these EFT transactions: the fund’s sender and the fund’s receiver.

In an EFT credit, the transaction debits the sender (decreases their account amount) and credits the receiver (increases their account value).

During an EFT debit transaction, on the other hand, the receiver’s account is debited, while the sender is credited the funds.

When Are EFT Debits and Credits Used?

  • When a business sends an EFT payment to a supplier, vendor, customer or borrower.
  • When a company gives customers the option to pay invoices or bills via electronic fund transfers.

Pre-Authorized Debits (PAD)

EFT debits provide businesses with the option to “pull” funds from their client and partner bank accounts on a one-time or recurring basis.

Prior to making any EFT debit transactions originators must collect explicit consent from the account holders. This needs to be accomplished with Pre-Authorized Debit Agreements (PAD).

PADs enable businesses to automatically debit accounts for one-time or recurring payments without seeking permission from the account holder.

With the new rules centered around PAD, these agreements are more flexible and secure than ever.

Payments Canada and other participating financial institutions have standardized PADs to ensure proper authorization and security.

As of this writing, there has been a recent law change for pre-authorized debit transactions; there is no longer a distinction between electronic and paper PAD agreements.

In addition, agreements will terminate once a one-time PAD is fulfilled, meaning that a new agreement must be set up to duplicate the payment. Rule H1 also now introduces the option for a payee to provide a method of verification to complete the transaction, if it meets the conditions for the PAD, their relationship with the sender of the funds, and would be considered valid in a court of law.

How Long Does It Take To Process An EFT Payment?

There are four types of EFTs that can be used to process payments; EFT debit, verified EFT debit, same-day EFT credit, and EFT credit requests that take longer than same-day processing.

EFT Debits

EFT debits take two to four business days to process on average. Once an EFT payment is started, transactions will be settled following the below timeline:

  • Collection: Payments will be collected within T+3 business days
  • Sending: Payments will be sent within T+1 business days

Verified EFT Debits

Verified EFT debit transactions provide additional speed and security than their traditional counterparts.

A verified EFT debit transaction comes with additional service checks (including the account holder name, account number and balance information) hence reducing the probability of EFT returns and rejects.

Verified EFT debit transactions are also faster to process; sometimes settling within the same business day if the transaction clears before 6 PM Eastern!

EFT Credit

EFT credits are subject to traditional settlement timelines listed below:

  • Collection: Payments will be collected within T+1 business days on average
  • Sending: Payments will be sent within T+1 business days on average

Same-Day EFT Credit

For those that need faster transaction resolution, same-day EFT processing is available when receiver’s account is with one of the “Big 5” Canadian Banks.Same-day EFT credits push funds into the receiver’s account and are settled within the same day. They are ideal for short-notice online bill payments and other urgent unexpected payments.

Please note that Payment Canada has three daily cut-off times for EFT payments (Monday to Friday excluding banking holidays):

  • 5:00 AM Eastern / 2:00 AM Pacific
  • 1:00 PM Eastern / 10:00 AM Pacific
  • 6:00 PM Eastern / 3:00 PM Pacific

In order to qualify for the same-day EFT credit processing, payments must be submitted before 6 PM Eastern / 3 PM.

What Are the Differences Between EFT and ACH Payments?

Automated clearing house, or ACH, is a payment network only available in the United States.

Though it seems that ACH is different from EFT, note that ACH is just a type of EFT.

ACH transactions are moderated by Nacha (National Automated Clearing House Association), a regulating body that governs most of the American payment industry.

ACH transactions work by bridging a gap between banks and creating daily debit and credit tallies. Once tallied, ACH transactions are queued and processed in batches.

What Are the Differences Between EFT and Wire Transfers?

EFTs and wire transfers; what is the better path forward for the future of finance? How about both?

Our payment services combine the time-tested method of bank wire transfers with the modern versatility of EFTs.

However, just to illustrate the differences between these methods, let’s compare the two.

Transaction Control

EFT – EFTs offer complete control over the payment process, including which day the payment should be posted to their client’s bank account.

Wire Transfer – While wire transfers can be speedy for domestic transactions, they are only useful for outgoing funds and can be very expensive.


EFT – EFTs are fast, completing as quickly as on the same business day.

Wire Transfers – Wire transfers can be slow to process if used for international transfers. These transfers can take from one to five business days to resolve, which can be costly if time is of the essence. Domestic wire transfers can be quick, usually processed on the same business day.


EFT – EFTs are very cost-effective.

Wire Transfers – Wire transfers can cost as much as $50 for each international or domestic wire transfer.


EFT – EFT payments are completely digital. Wherever you have an electronic device, you can facilitate a payment.

Wire Transfers – While wire transfers can now be initiated electronically, wire transfers are often handled manually at the bank level.

Why Electronic Fund Transfers Will Benefit Your Business

EFTs revolutionize your business. Join the modern world today.

1. Control And Visibility Over Your Commerce

Processing payments with paper and pen is cumbersome, error-prone, and time-consuming.

There’s so much time wasted on reviewing invoices, waiting for checks to be sent through the mail, and for credit card transactions to clear.

Shouldn’t all this time be used for running your business?

Why not gain back control? With EFTs, you can decide when to schedule payments from your customers, including when to bill them.

2. EFTs Are Cost Efficient

Processing credit cards online usually costs 1.3% to 3.5%[3] of the total transaction, which adds up with each subsequent transaction.

Electronic fund transfers not only provide more ways for your customers to pay but also reduce overheads. EFT fees are cheap, costing under a dollar per transaction.

Factoring in an EFT processing platform that offers affordable rates, such as AptPay, you could save thousands of dollars a month!

3. Give Your Customers Flexible User-Friendly Payment Options

EFTs are fast and easy to use, making setting up recurring payments and deposits a breeze! Your customers will love the ease and versatility that EFT payments offer.

All they have to do is provide their banking information once and the rest is set up for them.

4. EFTs Are Very Secure

EFT payments occur at the bank level, which means that transactions are direct interactions from one bank to another.

Gone are the days when checks get lost in the mail.

With direct online payments, fraud and forgery threats are minimized. Combined with the security of Fintech service providers, business transactions are secured and protected in a matter of moments.

With AptPay’s EFT processing platform, security concerns are a thing of the past.

Apt-EFT comes with built-in fraud and credit risk controls, all contained within an intuitive and easy-to-use interface. With ingrained status monitoring, transaction history is transparent and easy to track.

Though transitioning to online payments may seem complicated, AptPay can make this shift painless.

How Do I Know If EFT Payments Are Right For Me?

Still unsure if EFTs are right for you?

Does your business rely on recurring payments?

Do your customers pay for your services with paper cheques?

Are most of your customers paying for your business with credit cards?

Would switching to EFT payments save you money?

Could you transition your credit card-paying customers to EFT payments?

In Summary, EFT Payments:

  • Allow you to pay employees, suppliers and utility fees with ease
  • Set up seamless payments for customers
  • Improve security by removing the risk of lost, stolen, or forged checks
  • Reduce late payments and related fees
  • Eliminate the reliance on manual processing methods
  • Lower the overhead costs from processing credit cards and other working expenses

Getting Started with AptPay- Types of Payments AptPay Offers

Send digital payments to any financial institution across Canada or across borders. AptPay provides an easy-to-use processing platform to facilitate the digital movement of funds. AptPay’s payment solutions are fast, transparent and easy to implement.

AptPay works directly with EFT payment solutions to ensure seamless transactions across North America. With the speed and versatility of electronic fund transfers, there is no time like the present to embrace the future of commerce. Payments processed via AptPay are secure, fast, and easier to account for than traditional banking methods. No matter what the nature of the request is, there is an easier for effective digital way!

  • Shams Syed

    Before becoming CEO at AptPay, Shams led Digital Partnerships in Canada for Mastercard, gaining insights into the entire payment ecosystem, including payment facilitators, aggregators, and the evolving six-party model. His experience extends beyond fintech, as he has collaborated with acquirers, direct merchants, consultants, and loyalty programs, allowing him to approach the financial ecosystem with a holistic perspective and develop solutions that address the needs of all stakeholders.