What is an Electronic Funds Transfer (EFT)? - Insurance Navy. An Electronic Funds Transfer (EFT) is a digital method of transferring money from one financial institution to another without needing paper money to change hands physically. This system, facilitated by computer-based systems, allows for the electronic exchange of money between individuals, businesses, and institutions.
Electronic fund transfers can be executed within a single financial institution or across multiple institutions. They are regulated by the Electronic Fund Transfer Act of 1978 in the United States, which provides a legal framework for the electronic transfer of funds and protects consumers when they use such systems. Electronic transfers encompass several types of financial transactions, including direct deposit of paychecks, online bill payment, automatic withdrawal for recurring expenses, one-time transfers initiated online, and point-of-sale (POS) transactions that occur when a consumer uses a debit card, credit card, or electronic checks to purchase goods or services.