A Brief Guide To The Types Of Electronic Funds Transfer 

by Josh Biggs in Finance on 29th September 2022

We live in the age of digital convenience. Small businesses and individuals rely less and less on cash transfers in order to send and receive money. Cheque transfers are nearly unheard of in just about every popular field. In-person bank transfers are viewed as unwieldy and impractical. The vast majority of financial exchanges are completed digitally using processes known collectively as Electronic Funds Transference – commonly abbreviated as EFT. 

Electronic Funds Transfer is a term that covers a whole host of methods for the exchange of money using electronic means. As consumer and business financial technology has evolved, new methods of achieving an EFT have become popular. This article aims to explore the different ways in which Electronic Funds Transfers can be made. All small business owners and organizational leaders should keep a close eye on new modes of financial transfer as they emerge. Businesses that are quick to adopt methods of exchanging money digitally are far more likely to be prepared for major sea changes. Here are some of the most popular emerging and established EFT methods. 

Internet Transaction

If you have ever types your debit card details into an ecommerce website like Amazon in order to make a purchase, you have completed an Electronic Funds Transfer. As all small retail business leaders know, online purchases are one of the most important sources of custom overall. According to figures collated by Statista, roughly 14.5 percent of all purchases in the United States were made online during the first quarter of 2022. This percentage is roughly equaled in other countries with ubiquitous internet coverage like Australia and the United kingdom. A staggering number of sales are facilitated by online EFT systems. In order to be successful, an online EFT system has to be extremely secure. Any leaking of consumer financial information can seriously damage the reputation of a company and put huge numbers of people at risk of exploitation by criminals. The best ecommerce companies invest heavily in EFT security.

Direct Deposit

A direct deposit is perhaps the most conceptually simple of all the Electronic Funds Transfer methods. During the completion of a direct deposit, funds move directly from one bank account to another. The most common reason for the completion of a direct deposit is the payment of wages. In the United States, roughly 94 percent of all contracted employees are paid using direct deposit. In Australia, the Australian Payments Clearing Association ensures that employers and employees benefit from secure direct deposit transfers. 

Direct deposits have several key advantages over cheque payment when it comes to employer to employee transfers. Firstly, they clear automatically. This means that employees can instantly use money that is sent through on payday. Secondly, it means that taxes can automatically be deducted from a pay package without the employee having to register their income with the government. 


ATM machines allow consumers to make EFTs without having to speak to a human operator. They allow people to access their bank accounts, make transfers and electronically request cash. This is one of the earliest kinds of EFT to see mainstream use. The first ATM was installed outside a branch of the bank Barclays in Enfield, North London in 1967. It was the dawn of a new age in personal banking – an age in which electronic transfers became the primary means of moving funds. 

Interestingly, the first popular EFT interface -the ATM – is in decline due to the increasing popularity of more modern and convenient EFT interfaces. Mobile banking and card payment is making cash machines more and more irrelevant. 

Debit Card Transaction

Although a physical card is needed to make a debit card transaction, the card serves more as an identifying key – all funds are transferred electronically. Debit cards transfer money from a consumer’s current account into the account of the business they wish to pay. Businesses are increasingly adopting contactless debit card payment technology. This utilizes an NFT chip to enable payment by tapping a sensor. This is largely replacing chip and pin technology, which itself was considered revolutionary when it was introduced. Australia was a latecomer in adopting chip and pin technology. It’s use only became mandatory in 2014

Credit Card Transaction

Unlike debit card transactions, credit card transactions do not take money from the current account of the user. Instead, they transfer money that is loaned to the customer from their bank. Credit card users get access to good interest rates and extra spending money, but they must continue to pay off any debt that they accrue. 

Wire Transfer 

A wire transfer is used when transferring a large amount of money from one account to another, or when transferring money across borders that would prevent direct exchanges of money between accounts. Wire transfers must be arranged using an intermediary wire company like Western Union. These companies usually take a small cut of the money being transferred as a payment. Many people living and working abroad use wire transfer services to send money home to their families. 

Online Banking 

Online banking is now one of the most popular ways for Australians to access their accounts and make transfers of money. Online banking portals typically allow for the transfer of money from one account to another, the setting up of regular direct debit payments and the completion of a whole host of other EFT types. In order to make online banking more secure, most banks have implemented some form of multi factor authentication system – requiring customers to provide a password and at least one other form of identification. 

Mobile Online Banking 

Most banks that offer online transfers also publish apps that allow customers to access their online banking portals via their phones. Modern smartphones have sensors that make multi factor authentication more secure. Fingerprints, for instance, can be sensed and analyzed by most modern mobile telephones. Fingerprint authentication is an extremely secure method of identity confirmation – far more secure than a password. Mobile banking apps are often used to arrange small EFTs to other accounts. 

Categories: Finance