Electronic Fund Transfers (EFTs) help you save time, reduce security issues and minimize processing fees. EFTs allow you to automate payments and remove debit or credit card transfers from a transaction. Providing your customers with a safe and convenient payment method will ensure your business gets paid accurately and promptly.
EFTs still require that you engage with a payment processor that can minimize these fees and assure secure money transfers into your account. However, if you operate a high-risk business, you know that working with a payment processor can be challenging. You may face significant hurdles, access challenges and high fees. The good news is that Zenti helps you access the payment services you need at an affordable price.
Table of contents
- What’s an Electronic Fund Transfer?
- What Are the Advantages of Electronic Fund Transfers?
- What Are the Common Uses of an Electronic Fund Transfer?
- What Are the Challenges of EFTs for a High-Risk Business?
- What About Financial Technology Payment Companies?
- What Does My Business Need to Accept Payments via Electronic Fund Transfers?
- What About Security and Business Protection?
- Partner With Zenti
What’s an Electronic Fund Transfer?
An Electronic Fund Transfer moves money directly from one financial institution to another. More advanced than a wire transfer, EFTs enable direct transactions between bank accounts.
Another way to think of EFTs is as a digital check. You can use EFTs to transfer money without ever having to exchange a single piece of paperwork or visit an ATM to deposit a payment. As the payer, a person or business can initiate an EFT digitally. This electronic check process starts with a payment gateway on a website or by setting up a recurring payment.
The Accounts Clearing House Network (ACH Network), in which the National Automated Clearing House Association or Nacha operates, manages all EFT payments, including ACH transactions. This network is the backbone of the entire EFT system.
What Are the Advantages of Electronic Fund Transfers?
You know how expensive it can be to get money from customers. Flat fees, processing fees and the cost of credit card processing equipment can make it much harder for you to earn a profit.
That’s where Electronic Fund Transfers come in. These payment methods have many advantages over traditional cash or credit card payments, including:
Reduced processing fees
Processing is expensive for any business. Accepting credit cards usually involves a flat fee and a percentage fee for every transaction. With high-risk businesses, you operate with reputational challenges or are more likely than others to have a chargeback. In this case, your payment processing fees will increase.
Thankfully, EFTs are less expensive. Costs associated with EFTs can be multiple percentage points cheaper than the ever-increasing fees of credit cards.
Security is paramount for every business, and credit card fraud remains a significant problem. Your business must protect itself from fraud or processing fraudulent transactions.
This is where EFTs show their worth because they’re highly secure, easy to track and reversible. A payer can dispute a transaction and not worry about lost money. EFTs have automatic recordkeeping, including where the payment originated and where the payer sent it. This feature makes it easy to track information about an Electronic Fund Transfer.
EFTs can be reversed if there is an errand payment. However, this reversal requires both parties to consent to the change. The dual consent feature can help protect merchants from customers unexpectedly reversing their payments.
Automated record keeping
Tracking the paperwork is one of the challenges with cash or paper checks. You must ask the payer for a replacement if you lose a check. If you lose cash or someone steals it, the money is gone. These challenges mean you must invest time and money into creating a cash or check processing system.
EFTs are automatic. Once the money arrives, your role in the payment transfer or direct debit is complete. This automated process means you only need to synchronize your bank account with accounting software. You can even track payments and use them for later analysis.
Fast payment processing
Although not real-time, electronic payments move quickly and are usually accessible to merchants within 1-2 business days. As a result, businesses can access their money fast. EFTs are also predictable. When a company knows when to expect money transfers, it can have a more reliable and understandable cash flow.
Recurring and automated payments
Your business could create a system where customers pay their bills automatically. EFTs are relatively flexible in this way, and they help customers pay off an entire balance or a set amount. Customers set up an EFT by entering their account information and creating recurring payments.
Another option is to make automatic payments to a vendor via an EFT. These recurring payments remove the need for active memory in making payments, streamlining the process of paying your bills.
Using EFTs is a safe and reliable way to send money to a foreign country. It’s always faster than mailing a check, and you can use it to send payments via any number of currencies.
What Are the Common Uses of an Electronic Fund Transfer?
Thanks to their versatility and ease of use, EFT transactions have become commonplace in today’s financial market. Typical uses of an EFT include:
- Salary: If you work and receive an electronic paycheck from your employer, you’ll likely accept that paycheck via direct deposit. A business uses direct deposit to pay its employers directly.
- Purchases: With the proper financial software and payment gateways, a customer can use an ACH payment to purchase products or other goods via your business’s website.
- Recurring payments: Customers use EFTs for recurring payments. They can pay any amount in an invoice and send payments regularly, such as on the 1st of every month.
- Payment reminders: You can configure your EFTs to send automated reminders, helping your customers know when money will leave their accounts. This transparency ensures that your customer sees what they’ve paid and when they’ve paid it, reducing the odds of a chargeback.
- Government payments or tax refunds: Many government payments, including tax returns from the Internal Revenue Service (IRS), come in the form of an EFT.
What Are the Challenges of EFTs for a High-Risk Business?
Some businesses have a high-risk classification. Companies tend to earn this classification for two reasons: either the company has a high risk of chargebacks, or their business model comes with specific reputational concerns. A high-risk business classification isn’t a minor issue for businesses because many merchant account processors won’t contract with high-risk companies.
While high-risk companies can find the financial services they need, these solutions often come at a higher price and may require more work. For example, you may need to gather more paperwork, have higher cash reserves or turn over additional financial information. Sometimes, a merchant account processor may run a credit check on you.
These challenges apply to all financial transactions a high-risk business may need, including EFTs. Prices are higher for high-risk industries.
Some merchant account processors will set volume limitations on a high-risk business. Because of this restriction, you may have difficulty processing EFT payments. This can be a big problem if you have a very high level of transactions.
Your company needs to work with a merchant account processor that can help you manage these risks, yet this knowledge only comes with experience. A processor must understand your preferred payment method and be willing to work with your business. Zenti has decades of experience helping high-risk companies find ways to process payments and access the money customers have paid.
What About Financial Technology Payment Companies?
The past two decades have seen a massive rise in firms that can process money directly between two individuals. Networks such as PayPal, Venmo and Stripe have all become major players in this arena. They let individuals transfer money with each other and purchase an item via PayPal when a website has the correct code.
Businesses must contract with PayPal or other third-party vendors if they want to use their networks. However, PayPal will not contract with some businesses. Many high-risk companies find running all payments through a merchant account processor easier and more advantageous.
Since these financial transaction companies operate via EFTs, you must consider how to use these services when accepting payments. Similar to experiences with other EFTs, high-risk businesses may struggle to access third-party payment services like PayPal. This may mean that your business needs to work with a merchant account processor with experience in the high-risk industry.
Experienced providers like Zenti can help you identify other solutions to ensure you get the money you need. A high-risk merchant account provider may help you find ways to reduce your risk and access these services.
What Does My Business Need to Accept Payments via Electronic Fund Transfers?
Your business needs a merchant account provider that can assist in transferring money from one bank account to another.
Most EFT payments occur online, meaning you’ll need an online payment gateway. This payment gateway should enable someone to visit your website, load up a digital shopping cart, and pay directly to you. In addition, the gateway must integrate with all of your marketing material. With integration, you can collect the names, emails and phone numbers of the customers with whom you do business. You can even convert your payment gateway into a marketing tool for enhanced business broadcasting if done right.
Some companies use additional payment processors, like Woocommerce. Your merchant account processor must integrate with these services as well.
Another advantage is that EFT payments can help you process payments in batches. This will save you time, work and money. You can set up these batches for recurring payments, meaning you can automatically bill for services from week to week or month to month. This automation reduces fees and lost time, freeing you from worrying about forgotten bills to customers.
What About Security and Business Protection?
More businesses are falling victim to cybercrime and ransomware. Unfortunately, losing customers’ trust to process their credit cards securely is a death sentence for any business. In extreme cases, it can even result in lawsuits against you.
Your business must have the right tools in place to protect customer data. This protection extends to your merchant account processor, which must constantly update software to protect you from cybersecurity threats. They should follow cybersecurity news to remain current on emerging financial scams.
If you’re a high-risk business, you’re likely concerned about chargebacks. You can work with a provider to help you identify strategies to reduce chargebacks and keep the fees you incur to a minimum. Of course, this information can only come from a company experienced in this area. You’ll want to find a merchant account processor who can help your business reduce chargebacks.
Partner With Zenti
As you’re unquestionably aware, transferring money from one account to another is never a simple process in business. Zenti is here to help your business manage that process by supplying the inexpensive and secure financial tools you need to be successful. Zenti can assist your business with safe Electronic Fund Transfers, help reduce your high-risk business fees and provide access to payment gateways and other equipment and software. With decades of experience in EFTs, Zenti can find the specific solutions your business needs.
Ready to take the next step? Contact Zenti today, and learn more about how you can access the high-risk payment processing solutions you need and deserve.