Electronic Funds Transfer

Electronic Funds Transfer (EFT) is a system of transferring money from one bank account directly to another without any paper money changing hands. One of the most widely-used EFT programs is Direct Deposit, in which payroll is deposited straight into an employee's bank account, although EFT refers to any transfer of funds initiated through an electronic terminal or internet connection including credit or debit card, ATM, and point-of-sale (POS) transactions. It is used for both credit transfers, such as payroll payments, and for debit transfers, such as mortgage payments. It is widely used to debit participating non-profit donors on a reoccurring schedule.

The growing popularity of EFT for online bill payment is paving the way for a paperless universe where checks, stamps, envelopes, and paper bills are obsolete. The benefits of EFT include reduced administrative costs, increased efficiency, simplified bookkeeping, and greater security. However, the number of companies who send and receive bills through the Internet is still relatively small.

The U.S. Government monitors EFT compliance through Regulation E of the Federal Reserve Board, which implements the Electronic Funds Transfer Act (EFTA). Regulation E governs financial transactions with electronic payment services, specifically with regard to disclosure of information, consumer liability, error resolution, record retention, and receipts at electronic terminals.