Electronic Fund Transfer (EFT) is the transfer of funds from one bank account to another using electronic means. In the era of modern technology and everyday evolving payment technologies, you may have come across a term known as “EFT”. It allows individuals and businesses to make payments and transfer money without the need for physical currency.
EFT is the mode of payment which can be extremely beneficial for students who are studying abroad and are far away from their families or any working individual. This blog covers everything related to Electronic Fund Transfer(EFT full form), so don’t miss out on this amazing blog and continue reading.
Table of Contents
What is Electronic Fund Transfer?
In layman’s terms, Electronic Fund Transfer or EFT refers to the exchange of money electronically from one bank account to another using various electronic payment systems via computer-based systems. In today’s digital age, EFT has revolutionized the way people make transactions as it allows individuals or businesses to send or receive funds quickly and efficiently as people’s lifestyle is now fast-paced.
The increased use of electronic payment systems such as EFT has also resulted in decreased use of cash-based transactions which can be risky due to thefts as well as being costly due to banking fees associated with handling physical currency. Moreover, businesses are now able to have real-time insights into their financial transactions and EFT has proven itself to be a reliable fund-transferring instrument over time.
Full Form of EFT
The EFT full form is Electronic Fund Transfer. In this mode of transfer the money goes from one bank account to another electronically. EFT is preferred over other method of transfers because it offers convenience, speed, and security.
Also Read: Republic Bank International Wire Transfer
Types of Electronic Fund Transfers
Let’s take a look at the different types of Electronic Fund Transfers:
Automated Clearing House (ACH)
ACH is a type of electronic funds transfer that operates on a batch processing system. It is commonly used for payroll processing, direct deposit, and bill payments. The ACH system is managed by the National Automated Clearing House Association (NACHA), which oversees the rules and regulations governing ACH transactions.
One of the main advantages of using ACH is its low cost compared to other types of electronic transfers. Since ACH transactions are processed in batches, they can take several days to complete, but they are also generally more affordable than other methods like wire transfers.
Wire Transfers
Wire transfers are another type of EFT that allows money to be sent from one bank account to another quickly and securely. Unlike ACH transactions which are typically used for domestic transfers only, wire transfers can be used for both domestic and international payments. One major advantage of using wire transfers is their speed – funds can often be transferred within hours or even minutes if necessary. This makes them particularly useful for urgent or time-sensitive payments such as business transactions or emergencies.
Card-based payments
Card-based payments, such as credit card or debit card transactions, are another type of electronic fund transfer. These transactions typically involve the use of a payment gateway or merchant account to process the payment and transfer funds between accounts.
Also Read- What is the Full Form of SWIFT?
Process of Electronic Fund Transfer
In this section, you get to know how EFT actually works and how to do an Electronic Fund Transfer.
How EFT Works?
To initiate an Electronic Fund Transfer(EFT full form) transaction, the sender must first authorize their bank to transfer the specified amount of money from their account to a recipient’s account. The institution then sends an electronic message through a secure network to the recipient’s bank requesting that they can credit the specified amount. The receiver’s bank verifies and processes this request before crediting the funds into their customer’s account.
Process of EFT
As we got to know, how EFT works let’s understand how to do an Electronic Fund Transfer:
- Obtain the recipient’s banking information (Usually the account number and other details)
- Choose the payment method (Decide which type of EFT payment you want to make, ACH or wire transfer)
- Verify your identity through security questions or other authentication methods required by your bank, this is basically an authentication process
- Input the amount you want to transfer and any other relevant details such as a memo or description for your reference (the purpose of sending this money)
- Review all the details of your transaction before submitting it for processing
- Wait for confirmation, and after some processing time, you will receive a notification when the funds have been transferred successfully
Also Read- Things to Consider When Transferring Money Abroad
Forms Used in an EFT Transaction
Here are the two types of forms that are used in an Electronic Fund Transfer:
- ACH Debit Authorization Form– This form is widely used in the United States for making payments from one bank account to another using the Automated Clearing House (ACH) network. This is mainly used for recurring payments
- Wire Transfer Form– This is essential when transferring money internationally or on an urgent basis. These forms can also include indemnity clauses that protect both parties from losses in case of errors or fraud.
Examples of EFT
In our daily life we may use EFT unknowingly, E-commerce platforms such as Amazon have embraced EFT technology due to its efficiency and security measures. As we mentioned earlier EFT is also used in card-based payments. Banks are another example of businesses that rely heavily on EFT as it involves minimal risk. Lastly, EFT is also useful for companies that send out recurring bills on a monthly or quarterly basis, such as insurance providers or subscription-based services like Netflix. To conclude EFT has become an important part of our daily lives and for the last decade, it is the most reliable form of electronic money transfer used by financial institutions as well as normal individuals.
FAQs
If seen technically, yes the mechanism of both NEFT and EFT are the same as both are Electronic Fund Transfer. The major difference is NEFT (National Electronic Fund Transfer) is used in India and was introduced by RBI in 1995, whereas EFT (Electronic Fund Transfer) is widely used in the United States and was introduced by the Western Union back in 1871.
Although EFT is still considered one of the most reliable methods for a money transfer but over the years there are a few competitors of EFT like UPI and the new blockchain technology are also used along with EFT’s nowadays.
Electronic Fund Transfer (EFT) refers to the transfer of funds between financial institutions and individuals or businesses through an electronic network. Unlike traditional payment methods that involve the physical exchange of cash or checks, EFT uses electronic channels.
The full form of EFT is Electronic Fund Transfer. EFT uses electronic channels such as the Internet, mobile devices, or ATM machines to move money from one account to another.
This was everything related to personal loans for students. Reach out to Fly Finance for all finance-related concerns to simplify your study abroad experience with zero hindrances.
