EFT’s come in a variety of different types. They include:

·         Cardholder-initiated transactions, where a cardholder makes use of a payment card

·         Direct deposit payroll payments for a business to its employees, possibly via a payroll services company

·         Direct debit payments, sometimes called electronic checks, for which a business debits the consumer's bank accounts for payment for goods or services

·         Electronic bill payment in online banking, which may be delivered by EFT or paper check

·         Transactions involving stored value of electronic money, possibly in a private currency

·         Wire transfer via an international banking network (generally carries a higher fee)

·         Electronic Benefit Transfer

Business to Business EFTs typically comes in two different types. These two types include Wire Transfers and ACH transfers. 

Wire transfers are EFT between two banks. A wire transfer is simply an electronic transfer of funds. A wire transfer allows people on opposite sides of the globe to quickly and easily exchange money. The term wire transfer originates from a time when telegrams were used as the means of communicating over long distances. During that era, a wire transfer was a message sent over a telegram line, or wire, directing an amount of money to be given to a particular person. A wire transfer is a relatively safe means of instantaneously transferring money. The identities of the bank account holders are confirmed and the funds are guaranteed, so the potential of fraud in a wire transfer transaction is limited. A wire transfer can also be called a bank transfer or EFT (electronic funds transfer). An ATM transaction would be an example of a wire transfer.

ACH EFTs

(Automated Clearing House) is a system of the U.S. Federal Reserve Bank that provides electronic funds transfer (EFT) between banks. It is used for all kinds of fund transfer transactions, including direct deposit of paychecks and monthly debits for routine payments to vendors. The ACH is separate and distinct from the various bank card networks that process credit card transactions. ACH operations are done in a batch mode, which can take up to 72 hours before the money is actually transmitted. A return notification is sent if there are insufficient funds in the account.

Banks Automated Clearing House (ACH) is an electronic payment delivery system that allows you to make payments or collect funds electronically through the ACH network. How it works

ACH transactions are generally next-day entries when exchanged with other financial institutions. Accounts payable and accounts receivable functions include:

•                    Direct deposit

•                    Consumer debits

•                    Check conversion

•                    Corporate trade payments

Potential benefits

•                    Improved forecasting by eliminating check float

•                    Improved efficiency and accuracy by utilizing an electronic platform

•                    Reduced exposure to check fraud by reducing or eliminating paper check volume

•                    Reduced check expenses.

Cost Associated with EFTs

Wire Transfer EFT Costs Examples:

DOMESTIC fees

·         Outgoing $25

·         Incoming $12

International Fees

·         Outgoing – funds Sent in USD - $45

·         Outgoing – funds Sent in FX - $35

·         Incoming – $16

ACH EFT Costs Examples:

 

Clearly, utilizing ACH is a more cost effective way to process cash transactions versus wire transfers.

 

Andy Vitullo

avitullo@logan-consulting.com

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