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If you've managed the finance of a business, you would be familiar with both automated clearing house, also called ACH, and electronic funds transfer, also called EFT. Or, maybe you're unfamiliar with both terms, but there is a high chance that your business has either paid or received a payment through one or both of the electronic payment types.


People frequently ask the question and wonder, are ACH and EFT the same? What's the difference between ACH and EFT? The answer to this question is that ACH transactions are the same as the EFT, but EFT transactions are not the same as ACH. Now that is confusing! Don't worry, as you will have a clear understanding of both ACH and EFT once you reach the bottom of this page.




What are EFT payments?


Electronic Fund Transfer, or EFT is the process of moving electronic transfers of money between bank accounts without using a check or getting assistance from a bank representative. It's a direct deposit of funds from on account to another. Businesses can use Electronic Funds Transfers to send direct payments to vendors and suppliers or collect money directly from clients and customers without sending anything through the mail. EFT payments also support both single-entry and recurring payments for direct deposits. However, you cannot use EFT transfers to send money to businesses outside of Canada.


According to the Canadian Payments: Methods and Trends 2020 by Payments Canada, EFT is one of the top three payment methods used by Canadian SMEs. In Canada, from 2018 until now, EFT transactions continue to be the highest value of the transaction, dominating 50% of total payment value.


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What are ACH payments?


ACH is an electronic funds-transfer system run by the National Automated Clearing House Association (NACHA) to electronically transfer funds from one bank account directly into another bank account without using a cheque or getting assistance from a bank representative.


In 2020, NACHA reported that the ACH Network hit record growth to 26.8 billion payments moving nearly $62 trillion. Moreover, within “Business-to-business (B2B) payments by ACH for vendor and supply chain payments rose almost 15% from the fourth quarter of 2019 to 1.2 billion.”


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What's the difference between ACH and EFT payments?


Although both ACH and EFT are both electronic payment methods, there are key differences:


  1. ACH payments can only be initiated from the United States (US).

  2. EFT transactions can be processed as fast as in real-time. On the other hand, even with the improvement since March of 2018, shortening the processing time, ACH transactions mainly require up to 2 business days. Starting March 19, 2021, NACHA plans to expand access to Same Day ACH, increasing one day ACH payments.

  3. An EFT transaction can happen either between banks or directly from person to person, but ACH payments must be bank-to-bank transfers.

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What are the similarities between ACH and EFT payments? 


Similarities between ACH and EFT payments are the many benefits of both ACH and EFT payments.



Remote payment processing

Well, as we now know, both ACH and EFT are types of electronic payments, which in other words mean that business payments can be processed remotely.


Seamless financial processes

Accordingly, both ACH and EFT provide seamless accounts payable (AP) and accounts receivable (AR) financial processes for businesses. 


Faster processing

Although, ACH may not always be automatic payments. Both ACH and EFT payments are faster and cost-efficient for the business than processing checks, online checks, or credit card payments.



Both ACH and EFT payments have high-security measures and protocols in place, making both payment types safer than check payments.


Shorter bank processing times

There are no additional processing times required to access the deposited money through ACH or EFT, allowing more dependable cash flow. In contrast, check payments may be subjected to the banks holding onto the funds and take a couple of business days to clear and release the money for businesses to use.


Support for single and recurring payments

Both ACH and EFT support single or recurring payments reducing discomforts associated with recurring payments.


Accessible from payment solutions

Finally, you can remove manual bookkeeping and reconciling if you use a payment solution that offers electronic payments that connect with accounting software allowing your business to automate the process

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Security of ACH payments

ACH payments pass through the Automated Clearing House (ACH), where they are settled twice per day. This process involves multiple steps, including the transmission of data across the Internet. Because of this, ACH payments are considered secure. However, it is important to note that because of the way ACH works, transactions must settle twice per day — once during the regular banking hours and again overnight. In addition, because ACH uses a network of financial institutions, some of whom may not be online 24/7, there is always a chance that an ACH transaction could be delayed.


The Automated Clearing House (ACH), a system used to settle transactions among banks, has been around since the 1930s. Although it was originally designed to clear checks quickly, today ACH transfers account balances between financial institutions. There are three main types of ACH transfers: automatic clearinghouse debit (ACH-D), automated teller machine (ATM) withdrawals, and check presentment and payment (CPS). Common uses of ACH payments are employees' paycheque, tax refunds, government benefits, and interest payments.


An ACH transfer starts with the sender transferring funds to the recipient's bank. This process is called posting the transaction. Once posted, the receiving institution debits the sender's account balance and credits the recipient's account. If the receiver does not receive the money within five days, the sending institution must send another ACH transfer request.


In addition to settling ACH transfers, the ACH network provides real-time data about the status of accounts across participating institutions. For example, if you want to know whether someone has deposited $10 into your checking account, you could look up the account number online. However, if you wanted to find out if the same person had withdrawn $20 from his savings account, you might have to call the bank directly. With ACH, you don't have to do either. You just look up the account number and see what happened.


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Speed of EFTs

The Automated Clearing House (ACH) process occurs every day, releasing payments twice per day. This means an ACH payment isn't an immediate payment in the same way that most other EFT processes occur within seconds of making a payment. However, there are some exceptions to this rule. For example, you could send money via credit card and it would take up to three days to clear. In the case of wire transfers, the transfer takes about 24 hours to complete.


Most other EFT payments are far faster than ACH payments and the funds are released almost immediately. Funds are usually released within minutes, making receiving payments or sending money much faster.


The Automated Clearing House (ACH) is one of the most popular methods for transferring money online. This method allows you to make transfers quickly and cheaply via your bank account. However, it does take some time for the transaction to process. In fact, it takes about five days for ACH transactions to clear. But what happens during those five days? What do you do while waiting for your money to arrive? And how long do you wait?


To find out, we compared the average speed of ACH payments to the average speed of EFT payments. We found that ACH payments took around 5 days to clear, whereas EFT payments cleared within just over 24 hours. So there's no reason why you shouldn't use EFTs whenever possible.


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Benefits and downsides of ACH and EFT payments

In Canada, most small businesses accept cash payments. However, there are some advantages to accepting electronic payments. For example, it allows merchants to offer discounts to customers who pay electronically. This could include offering a discount for paying via credit card or debit card. Some consumers might prefer to use one form of payment over another because of the associated fees. Electronic payments can help reduce those costs.


There are also some disadvantages to accepting electronic payments. Merchants must keep track of the amount owed to each customer. They must ensure that they have enough funds to cover the transaction. If a merchant does not have enough money to cover a purchase, he or she may lose out on future sales. Additionally, there is no guarantee that a consumer will make good on his or her promise to pay. Therefore, merchants must take extra measures to protect themselves.


More and more Canadian businesses are choosing to accept electronic payments over cash. This shift towards digital currency is due to several reasons. One reason is that it allows businesses to keep track of each transaction. Another reason is that there are fewer fees associated with processing electronic payments. Electronic payments also allow businesses to reduce their accounting burdens.


There are plenty of advantages to accepting electronic payments. For one thing, it makes life easier for both customers and employees. Customers don't have to worry about carrying around large sums of money. Employees no longer have to deal with paper receipts. And since electronic payments are processed quickly, there is less delay when making purchases.


However, electronic payments do come with some drawbacks. First, some merchants choose to use different types of electronic payments depending on how much they plan to spend. Some merchants prefer to use credit cards while others prefer to use debit cards. Second, there are additional costs associated with processing electronic payments, such as monthly fees. Third, there is a risk that hackers could steal sensitive information like bank account numbers. Finally, some people find it difficult to understand what the charges mean.



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Summarizing EFT vs ACH payment method differences 

EFT (Electronic Funds Transfer) and ACH (Automated Clearing House) are terms that include bank transfers, wire transfers and other online electronic payment systems. These types of payments are popular because they are fast, convenient, and usually cheaper than traditional check clearing processes.


For example, you could pay someone $1,500 via EFT, while it would take about 3 weeks to receive a paper check for the same amount.


ACH is a term that refers to electronic bank transactions processed by the Automated Clearinghouse (ACH). In the US, most banks participate in the ACH system. This type of transaction is often referred to as "bank transfer," although technically it isn't a bank transfer since it doesn't involve physical cash being moved.


ACH processing time and receipt times are generally faster than those associated with paper checks. For example, an ACH payment process can typically be completed in one day whereas it takes several days for a paper check to clear.


The benefits of ACH over EFT are speed, convenience, and low cost. However, there are some disadvantages. For example, ACH is limited to smaller amounts ($10,000 or less), and it cannot be used for international transfers. Also, ACH does not provide immediate confirmation of payment, unlike EFT.


How to save money using EFT payments

1. No need for paper checks.

By processing payments electronically, it removes the need to purchase paper checks in bulk.


2. Quicker payments avoid fees.

EFTs can be sent and received as quickly as the same business day, saving you on potential late fees. If you’re paying invoices early, you may 


3. Less resourcing required to process.

Since EFTs are largely automated beyond the initial filling out of bank account information, less people are needed to process an EFT. Integrations with an accounting software solution also remove the need for manual bookkeeping and reconciling of invoices. 


4. Secure your transactions.

EFTs are processed securely from one party to another, reducing the risk of lost payments or fraud.


Both EFT and ACH payment usages amongst the businesses are evident. If you already haven’t, it’s time to adopt a digitalized financial process for the company. Plooto is a modern cloud-based ease to use and affordable payments and receivables solution that allows both ACH and EFT for your business.


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