Wire transfer vs. electronic transfer: What's the difference?

Digital solutions are rapidly gaining momentum within the scope of business payment strategies today, thanks to several clear advantages including speed, efficiency, and security. But as the adoption of digital payments becomes more widespread, and the volume of paper checks continues to decline, there is still some confusion over exactly what is electronic fund transfer (EFT) and, more specifically, what’s the difference between electronic and wire transfer.

What is electronic fund transfer?

In a nutshell, electronic fund transfers (EFTs) involve the electronic transfer of money from one bank account to another bank account. Many electronic payments fall under the EFT umbrella, but the most common types of EFT transactions include ATM transactions, eChecks, point of sale (POS) transactions, direct deposits for payroll, business-to-business (B2B) payments, online bill pay, and wire transfers.

How does EFT work?

Most EFTs are processed through an Automated Clearing House (ACH). The ACH aggregates transactions for processing from one bank or financial institution to another. It’s a batch processing system that moves money by either pushing funds out of the originator’s account or pulling funds from the receiver’s account.

How long do EFT transfers take?

The exact timing can vary, but most EFT payments clear in 1-3 business days domestically. International EFTs or those that involve large sums of money may require additional time. This is primarily because ACH payments are not processed in real time; they are processed in batches, and multiple parties are involved.

What is an Automated Clearing House (ACH)?

The ACH is an electronic network that serves as the primary method for financial institutions, businesses, and individuals to send or receive funds. It works like this: one bank initiates a transfer which is then sent to the ACH operator. The clearing house receives transaction requests in bulk and processes them in batches. Processed transactions are sent to the receiving bank, which makes the required payments from or deposits to each receiver’s account.

What’s a wire transfer?

The best way to describe the difference between electronic and wire transfer is that wire transfer is a type of electronic fund transfer. A wire transfer is a transaction between banks that moves funds from one account to another through a secure messaging system. The most common types of wire transfer include sending money from one bank to another bank or sending money via a non-bank institution like a money transfer operator. This brings us to a common question: is direct deposit a wire transfer? The answer is no, direct deposits are a type of EFT.

How do wire transfers work?

The payor simply provides their bank or money transfer company with the amount to be wired; the account number from which the funds will be drawn; the name, address, and phone number of the recipient; and the account number and bank routing number for the recipient. The payment is then deducted from the payor’s account, along with a wire transfer fee. Once a wire transfer transaction is complete, it cannot be reversed.

Is wire transfer safe?

Because the bank and non-bank entities that handle wire transfers are governed by regulatory authorities, wire transfers are considered a secure way to transfer funds.

How long does a wire transfer take?

Transaction speed is one reason to choose wire transfer vs electronic transfer. Funds sent via wire transfer domestically can be completed in minutes to hours, if processed prior to the daily cutoff time. Funds wired internationally may take up to a few business days.

What is the difference between ACH and wire transfer?

They are both safe and convenient electronic payment solutions! If you’re looking for a fast, one-off transaction and are comfortable paying a higher fee, a wire transfer may be your choice. For recurring or regular payments and credits where you want to avoid fees, and transactions don’t necessarily need to be completed same-day, ACH may be preferable.

What is the difference between electronic and wire routing numbers?

Both electronic payment options use routing numbers. For inbound or outbound domestic wire transfers and ACH transactions, you’ll need the nine-digit routing number that identifies a bank or other financial institution in the U.S. For international wire transfers, you’ll also need a SWIFT code. 

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