ACH vs EFT Payments: Key Differences for Canadian Companies

Electronic payments have become commonplace in modern business transactions, but it can be tough to figure out which method is best. Are you wondering about ACH vs EFT? What about wire transfers? And does it even matter? 

Spoiler: Oh, it matters.

Your chosen payment method can impact every area of your accounts payable process: cash flow, transaction costs and operational efficiency. What does the right choice mean for you? You can confidently pay your employees on time, suppliers receive what’s owed and customers experience seamless transactions. 

Since growing businesses need reliable online payment options, most have embraced some form of EFT payment. Just over 60% of Canadian businesses surveyed accept EFTs. 

Let’s take a closer look at the options available. In the past, payment options for Canadian businesses were relatively straightforward: Electronic Funds Transfers (EFTs) for domestic transactions, Automated Clearing House (ACH) payments for U.S. transactions, and wire transfers for cross-border payments. 

However, with the rise of modern financial providers, some Canadian businesses now have more flexibility, including the ability to send ACH payments depending on their bank or payment provider. You may have heard of Wise, a payment platform handling online payment processing in the U.S. Now Canadians can also explore a variety of options to streamline their accounts payable processes.
 

In this guide, we’ll review your options to help you understand these payment methods and determine what’s best for your business.

What is an EFT payment?

Electronic Funds Transfer (EFT) is a broad term that covers all digital payments that move money from one bank account to another. Traditionally, EFT was the standard for Canadian businesses, used for payroll, vendor payments and online bill payments. 

While this remains true, some modern financial providers now allow businesses to send payments across borders using EFT-like methods, making it essential to check with your financial institution to understand your options. It may be time to weigh EFT vs ACH to see how the comparison checks out.

Unlike traditional cheques or cash transactions, EFTs leverage digital networks to facilitate transfers quickly and securely. Depending on the payment type (see common types below), processing times for EFT payments can range from one to four business days. 

Online payments have been trending upward, with EFT payment values in Canada growing 40% in the past five years. EFTs are widely used across Canada, enabling businesses to send and receive payments without visiting a physical branch or filling out paperwork like it’s 1925.

It makes sense. Most of us aren’t carrying around a lot of cash, because we find it faster, easier and more secure to pay online for everything from coffee to home renos. Online payments help your business do the same thing.

So, what is an EFT payment exactly?

Common types of EFT payments include:

• Direct deposits: Used for payroll processing and vendor payments.
• Debit card transactions: Funds are withdrawn electronically at the point of sale.
• ACH payments: Cross-border transactions that use a batch processing system with predictable timing.
• Wire transfers: Typically used for large payments (both domestic and international wire transfers).
• Online bill payments: Automated payments for utilities, leases and subscriptions.
• Interac e-transfer: Commonly used for quick peer-to-peer and business transactions.

EFTs provide a secure way to manage cash flow with automation options that reduce administrative overhead—and ease frustration. Since transactions occur electronically, there is also a lower risk of errors and fraud compared to traditional paper-based payments.

Best practices for using EFT payments

Here are a few quick tips on how to make an EFT payment quickly and securely. 

1. Verify recipient details
   Always double-check recipient information, including bank account numbers and names, to prevent payment errors and delays.
   
2. Use secure banking platforms
   Ensure you use a secure banking portal or trusted payment provider to minimize fraud risks.
   
3. Schedule payments in advance
   Set up EFT payments ahead of time to ensure timely processing and avoid unexpected delays.

What is an ACH payment?

Automated Clearing House payments, or ACH payments, are a specific type of EFT that processes transactions in batches through an Automated Clearing House payment network. Unlike other types of EFTs that process transactions individually, ACH transactions are grouped together and processed at set intervals throughout the day.

Historically, ACH was exclusive to the U.S., with Canadian businesses relying on EFT for domestic transactions. However, some modern financial providers (like Float) now offer ACH payment capabilities for Canadian businesses, enabling cross-border payments without relying solely on wire transfers. 

If your bank or payment provider supports ACH, it could be a cost-effective way to send funds to U.S. businesses. For Canadian SMBs with a U.S. entity, this is good news.

So, a smart first step is an exploratory check-in with your financial institution and alternative providers to evaluate the options available.

What is an ACH payment’s key benefit?

ACH payments get a gold star for cost-effectiveness. Since they are processed in bulk, businesses can reduce transaction fees compared to wire transfers or credit card payments. ACH transactions are also reliable and predictable, making them ideal for regular payments where timing consistency is crucial (e.g. anything that makes payroll easier is a big win-win).

However, because ACH payments process in batches, they may take longer than individual EFT transactions. Timeframes can vary, but most ACH payments are completed within one to three business days, with some financial institutions offering expedited processing options. This means ACH is best suited for payments that do not require immediate settlement but benefit from lower costs.

Best practices for using ACH payments

Here are a few tips to keep in mind when sending ACH payments.

1. Ensure proper authorization

Obtain written or electronic authorization from payees before initiating ACH payments to comply with banking regulations.

2. Monitor transactions regularly

Keep an eye on ACH payments to quickly identify and address any errors or failed transactions.

What is a wire transfer?

A wire transfer is a fast and secure method of electronically transferring funds between financial institutions, both domestically and internationally. Unlike ACH and EFT payments, wire transfers are processed in real time, ensuring that funds are available to the recipient the same day they are sent. 

In Canada, domestic wire transfers are processed through Lynx, the country’s electronic wire payment system.

When are wire transfers used?

Wire transfers are commonly used for high-value transactions, urgent payments or cross-border transfers where real-time settlement is required. Businesses often choose wire transfers for:

• Large supplier or vendor payments that require immediate clearing
• International transactions where ACH or EFT is not an option
• Time-sensitive financial obligations

What you should know about wire transfers

Once sent, wire transfers cannot be reversed. However, while wire transfers offer the advantage of speed and certainty, they also tend to be more expensive than other payment methods. Fees can vary widely between banks, and are often much steeper per transaction than other options, with additional costs for currency conversion if sending funds internationally. 

To avoid delays, businesses must ensure that recipient details, including banking information and currency specifications, are accurate before initiating a transfer.

ACH vs EFT vs wire transfers: Understanding your payment options

While both EFT and ACH payments offer efficiency and security, the differences in cost, processing time and transaction flexibility can significantly impact your financial workflow. Understanding these differences is one key accounts payable strategy that can help you manage your financial workflow. 

Below, we break down each method’s advantages and drawbacks to help you decide which is best, whether you need to manage payroll or pay a U.S. invoice.

As outlined, traditionally, Canadian businesses have used EFT for domestic transactions, while ACH was reserved for U.S. bank transfers. Wire transfers were the primary solution for cross-border payments. However, newer financial providers now offer Canadian businesses access to ACH payments, meaning the landscape is evolving.

Step 1: Check what your financial institution offers

Before deciding between EFT and ACH, the first step is understanding what’s available to you. Not all banks in Canada offer ACH payments, meaning your options may be determined by your financial provider.

If your bank only supports EFT: You’ll use EFT for domestic payments and wire transfers for cross-border transactions.

If your bank or payment provider supports ACH: You may have the ability to use ACH for payments to U.S. businesses, potentially reducing costs compared to traditional wire transfers.

If neither option is available: You may want to explore modern financial providers that enable cross-border ACH or EFT payments as an alternative to expensive wire transfers.

Step 2: Compare costs and processing times

Once you know your available options, compare fees (we’ve got an international money transfer calculator for that!), speed and transaction processes to determine the best method for your business needs.

EFT: Best for Canadian transactions, typically low-cost, with convenient processing times.

ACH: A cost-effective option for paying U.S. vendors, but processing times can vary depending on batch processing schedules.

Wire Transfers: Typically the fastest cross-border option but comes with much higher fees.

Step 3: Consider a modern payment provider

If your current bank doesn’t offer ACH, but you want to explore alternatives, newer financial providers offer ACH and EFT options beyond traditional banking. These providers may offer lower fees than wire transfers, but it’s important to check for additional costs, including currency exchange fees.

By following these steps, you can determine whether you should continue using EFT, explore ACH, or seek modern payment solutions that align with your business needs.

Learn more with Float: Modern business expense management and corporate cards

While EFT, ACH and wire transfers each still serve specific roles, the online payment landscape in Canada is evolving. Many businesses still rely on traditional EFT payments, but those working with alternate payment providers such as Float may have access to ACH for U.S. transactions, offering a potentially more affordable alternative to wire transfers. 

Both EFT and ACH payments provide businesses with efficient ways to send and receive money, but their differences make them suitable for different use cases. EFT may be the better option if speed and versatility are your priority. However, if cost savings and predictable recurring payments are more important, ACH is likely the best fit.

Understanding the options available and the key differences between them allows business owners to make informed decisions that optimize cash flow, reduce transaction costs and improve financial management.

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