What is EFT? Electronic Funds Transfer Explained
A plain-English guide to EFT payments in Canada. What it is, how it works, how long it takes, and how it's different from Interac e-Transfer.
What is EFT?
EFT stands for Electronic Funds Transfer. It's the general term for moving money electronically between bank accounts, without using cash, cheques, or physical payment methods.
In Canada, when businesses talk about "EFT," they usually mean the batch payment system managed by Payments Canada. This system processes millions of transactions daily—payroll direct deposits, vendor payments, bill payments, and more.
Examples of EFT
- Direct deposit: Your employer pays your salary directly to your bank account
- Vendor payments: A business pays its suppliers electronically instead of by cheque
- Pre-authorized debits: Your gym membership automatically withdraws from your account
- Government payments: Tax refunds, benefits, pension deposits
The key difference between EFT and writing a cheque: EFT is processed electronically through the banking system, so there's no physical paper changing hands. It's faster, cheaper, and more reliable.
How EFT works in Canada
Here's what happens when a business sends an EFT payment:
A file containing payment details: who to pay, how much, their bank account info. In Canada, this file is usually in CPA-005 format.
The business uploads the file through their bank's business banking portal.
The bank validates the file and submits it to the Automated Clearing Settlement System (ACSS).
ACSS matches payments between banks and settles the net amounts.
Recipients see the deposit in their account, usually 1-2 business days later.
The file format matters. Canadian banks require a specific file format called CPA-005 for credit payments (paying out money) and CPA-080 for debits (collecting money). If your file isn't formatted correctly, it gets rejected.
Types of EFT payments
EFT is an umbrella term. In Canada, it covers several specific payment types:
Credits (paying out)
- Direct deposit: Payroll, expense reimbursements
- Vendor payments: Paying suppliers and contractors
- Dividends: Shareholder distributions
- Refunds: Customer refunds, tax refunds
Uses CPA-005 file format
Debits (collecting)
- Pre-authorized debits (PADs): Recurring bill payments
- Membership fees: Gym, subscriptions
- Loan payments: Mortgage, car payments
- Insurance premiums: Monthly insurance costs
Uses CPA-080 file format
Important distinction: When someone says "EFT payment" in a business context, they usually mean credits—paying money out to vendors or employees. When they say "PAD" or "pre-authorized debit," they mean collecting money from customers.
EFT vs Interac e-Transfer: What's the difference?
This is the most common source of confusion. They're both electronic, but they work very differently:
| EFT | Interac e-Transfer | |
|---|---|---|
| Best for | Batch payments (payroll, vendor runs) | One-off payments to individuals |
| Speed | 1-2 business days | Minutes to hours |
| Cost per transaction | Pennies (when using batch files) | $1-2 per transfer (varies by bank) |
| Recipient info needed | Bank account number, transit, institution | Email address or phone number |
| Batch capability | Yes—hundreds of payments in one file | No—one at a time |
| Ideal volume | 10+ payments at a time | 1-5 payments at a time |
| Typical users | Businesses, payroll departments | Individuals, small businesses |
Rule of thumb: Use Interac e-Transfer for quick, one-off payments where you don't have (or don't want to ask for) bank account details. Use EFT for recurring payments, payroll, or any time you're paying multiple people at once.
EFT vs wire transfer
Wire transfers are also electronic, but they serve different purposes:
| EFT | Wire Transfer | |
|---|---|---|
| Speed | 1-2 business days | Same day or next day |
| Cost | Pennies to dollars | $15-50+ per transfer |
| Reversible? | Sometimes (within limits) | Generally no |
| International | Not directly (Canada only) | Yes |
| Best for | Regular domestic payments | Large, urgent, or international payments |
When to use wire: Real estate transactions, urgent large payments, international transfers. For routine vendor payments or payroll, EFT is far more cost-effective.
EFT vs ACH: Why Canada is different
If you've searched for EFT help online, you've probably found US-focused content about "ACH." Here's why that doesn't apply in Canada:
| Canadian EFT | US ACH | |
|---|---|---|
| Managed by | Payments Canada | NACHA (National Automated Clearing House Association) |
| File format | CPA-005 (credits), CPA-080 (debits) | NACHA format |
| Bank routing | Institution (3 digits) + Transit (5 digits) | Routing number (9 digits) |
| Currency | CAD only | USD only |
Bottom line: US ACH guides, software, and file formats don't work in Canada. If your bank is asking for a "CPA-005 file" or "EFT file," you need Canadian-specific tools and formats.
How long does EFT take?
Standard EFT processing in Canada:
Typical timeline
- Day 1: You upload the file to your bank before the cutoff time
- Day 1-2: Banks process and clear the transactions through ACSS
- Day 2-3: Funds appear in recipient accounts
Total: 1-2 business days from upload to deposit (assuming no errors or holds)
Factors that affect timing
- Cutoff times: Miss your bank's daily cutoff and processing starts the next business day
- Weekends/holidays: No processing on non-business days
- File errors: Rejected files need to be fixed and resubmitted
- New payees: First-time payments may face additional verification
- Large amounts: May trigger additional review
Planning tip: For Friday payroll, submit your file by Wednesday to ensure funds arrive on time. Thursday submissions may not clear until Monday.
EFT costs and fees
EFT costs vary depending on how you send payments:
Batch file upload (cheapest)
Upload a CPA-005 file through business banking
- Usually included in business account
- Per-transaction fees often $0.05-0.50
- Some banks: flat monthly fee, unlimited transactions
Individual bank portal entry
Enter each payment manually in online banking
- Higher per-transaction fees ($1-5)
- Time cost of manual entry
- Error-prone at volume
Payment platforms (Plooto, etc.)
Third-party services that handle EFT
- ~$1+ per transaction
- Convenient but adds up at volume
- 200 payments/month = $200+/month
EFT file generators
Software that creates files for bank upload
- Flat monthly or one-time fee
- No per-transaction costs
- You still upload to bank yourself
Cost calculation: If you process 100+ payments monthly, flat-rate options (batch upload or file generators) almost always beat per-transaction pricing.
How to send EFT payments
Three main approaches:
Option 1: Built-in software
If your payroll or accounting software generates CPA-005 files directly
- Generate the EFT file from your software
- Log into your bank's business portal
- Upload the file
- Authorize the payment run
Works with: ADP, Ceridian, some versions of Sage
Option 2: Payment platform
Use a third-party service like Plooto or Telpay
- Connect your bank account to the platform
- Enter or import payments
- Approve and send
Convenient, but per-transaction fees add up
Option 3: File conversion tool
Convert your existing exports to CPA-005
- Export payment list from your accounting software (Excel, CSV)
- Import into conversion tool
- Generate CPA-005 file
- Upload to your bank
Best for: QuickBooks, Xero, or any software that exports to Excel but doesn't generate CPA-005
Common EFT problems
File rejected by bank
Your CPA-005 file has formatting errors
Fix: Check account numbers, institution/transit codes, amounts, and file structure. Use validation before uploading.
Payment returned
Bank accepted the file but payment bounced back
Common causes: Closed account, incorrect account number, name mismatch. Verify recipient details.
Funds didn't arrive on time
Payment is late reaching the recipient
Causes: Missed cutoff time, processing delays, holds on large amounts. Plan submissions 2-3 days before needed date.
Wrong amount sent
Payment amount doesn't match expectation
Common cause: Amount formatting errors (decimals in wrong place, or amounts in dollars instead of cents). Always verify before submission.
Summary
- EFT = Electronic Funds Transfer, the batch payment system Canadian banks use
- Different from Interac e-Transfer (which is for one-off payments)
- Uses CPA-005 file format for credits (paying out)
- Processing takes 1-2 business days
- Cheapest at volume via batch file upload
- US ACH formats don't work in Canada—you need Canadian-specific tools
Need to send EFT payments?
EFT Flow converts your Excel or CSV exports into bank-ready CPA-005 files. No per-transaction fees. Your data stays local.