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Electronic Funds Transfer

Overview

You may not have heard of EFT but you have probably experienced it. If your salary is paid directly into your account, it is paid by EFT. If a dividend is paid into your account, it is paid by EFT. If you create an online payment, it is usually delivered by EFT. EFT is, in effect, electronic credit transfer.

EFT is the most popular method of paying many business payments in many European countries, and will progressively replace cheques in Ireland.

EFT provides certainty of payment – there is no concept of “bouncing” in an EFT-based system

In Ireland, EFT transactions are frequently created automatically by payroll systems and creditor systems, each of which create a file for uploading to your bank, and onward from there.

In more advanced systems in certain countries integrated systems automate the payment process from invoice creation (or earlier) through to presentment and payment. Such systems create substantial savings to business users of the payment process.

There are two clearing systems for EFT transactions:-

  • The National EFT clearing system is operated by IRECC Ltd, and is used to clear EFT transactions within Ireland.
  • STEP2 is a Europe-wide clearing system for euro-denominated transactions

Under the Payment Services Directive, the process of clearing EFT will be speeded up and guaranteed clearing times come into operation from Jan 2012.

  • Banks will be permitted to specify a clearing cut-off time sometime in the afternoon of each business day.  Any euro transaction presented (in the correct format) to the bank before that time must be credited to the destination account and made available to the payee during the next business day, provided that the destination account is denominated in euro and held in a European bank.