Home Techonology Who Processes An EFT Payment?

Who Processes An EFT Payment?

by Faisal Sheikh

Businesses constantly make payments to vendors, suppliers, contractors, and employees. The modern business owner can skip cash and paper checks for a more efficient EFT (electronic fund transfer) payment. EFT payment involves sending and receiving funds electronically over a computerized network. The sender and receiver must both have a bank account. 

What Is An EFT Payment?

EFT is an umbrella term for electronic payments and covers ACH (Automated Clearing House), wire transfers, and other digital payments. ACH is one of the most common EFTs processed by the bank. The ACH network is a transfer system connecting banks, credit unions, and financial institutions in the United States. EFTs are payments processed digitally without the need for cash. You’ll encounter many payment systems that fall under EFTs.

Each electronic fund transfer option offers unique merits and drawbacks, but all boast swift transactions. Popular EFTs include direct deposits, wire transfers, debit cards, ATMs, mobile wallets, and personal computer banking. Others include pay-by-phone systems, electronic checks, and EFTPS (electronic federal tax payment system). Direct deposits are ideal for paying employees electronically after processing the payroll.

Wire transfers offer a fast way to send large, infrequent payments to vendors and carry a fee. EFTPS is a tax payment service for remitting tax payments to the IRS, while ATMs let you bank without needing a teller. EFTs allow users to send and receive funds or schedule payments. You can also make bulk payments instantly. Businesses can use EFTs to make purchases, clear invoices and payrolls, or place down payments on buildings, equipment, and supplies.

How Are EFTs Processed?

Processing an EFT requires three main parts; sender, receiver, and transfer network. The sender must provide the receiver’s account name, account number, routing number, and bank name. EFT transfers are straightforward and can be completed using a phone, PC, ATM, or point of sale. The sender initiates the transfer, which is passed through the request channel through digital networks to the banks.

Digital networks may originate from the internet of a payment terminal. The request reaches the sender’s bank, which processes the payments to the receiver’s bank. Payments clear within a couple of days. Some EFT payments are free, while others feature transaction fees. The fees and processing time depend on the type of payment, EFT provider, and time of submission. Some systems only work during official business days.

Who Regulates EFTs?

EFTs are regulated under the Electronic Funds Transfer Act (EFTA), which allows the government to monitor payment compliance. The act covers various issues, including record retention, consumer liability, error resolution, and privacy. Banks, credit unions, and other financial institutions must comply with the EFTA regulations or risk litigations from customers. In addition, the act protects individuals and entities that make EFTs. Here’s what it covers:

•    Unauthorized Transactions: Financial institutions must investigate all incidents of unauthorized transactions if the customer reports it within 60 days.

•    Lost/Stolen Debit Cards: EFTA limits customer liability for unauthorized transactions to $50 if they report lost or stolen debit cards within two days.

•    Compensation For Violations: EFT users can potentially recoup damages from a bank if it violates the EFTA guidelines and causes losses.

•    Withdrawal Limits: Banks and financial institutions must put daily withdrawal limits on debit cards to protect users from potentially unauthorized withdrawals. 

Timeliness is the critical factor in limiting one’s liability for unauthorized transactions. Consumers should review bank statements regularly to check for unrecognizable transactions. You can also set up alerts with the bank to get text and email notifications in case of potentially unauthorized transactions. Businesses can also leverage secure APIs and fintech-as-a-service models to keep tabs on all EFTs and ACHs from different digital payment infrastructures.

How To Process Your EFTs Safely

EFTs can make businesses thrive in local and global markets. With so many types of EFTs, businesses need a central dashboard to manage the different payment systems. An open API can help unify digital payments and eliminate the need to build new infrastructure. APIs also accommodate multiple integrations and offer access to the fastest EFT rails.

Businesses looking to leverage EFTs should stick to reliable APIs and integrations that provide security, flexibility, and transparency. Making a secure EFT payment is effortless when you use leading fintech services and solutions customized to your operations. The goal is to automate payment collection and billing to ensure all payments are timely, accurate, and efficient.

Related Posts

Businesszag logo

Businesszag is an online webpage that provides business news, tech, telecom, digital marketing, auto news, and website reviews around World.

Contact us: info@businesszag.com

@2022 – Businesszag. All Right Reserved. Designed by Techager Team