A Fresh Look at Electronic Fund Transfer Payments

In a perfect world, we should be able to “click and pay” anyone, anytime, securely, and at a reasonable fee. That would be true for businesses as well as individuals. The advancement of technology has enabled that process. However, the evolution of EFT processing in combination with other financial services has muddies the waters to the point of making a discussion like this necessary. It’s actually not easy or cheap for small businesses. Even when the systems themselves are secure, it is too easy for sophisticated people to be fooled into making a human error that enables fraud. In other cases the fees are increasing to the point of raising objections.

For example, until recently, I often recommended QuickBooks Payments that charged a flat $.50 fee for processing payments. That service was typically bundled with QuickBooks accounting. To make payments, I often recommended Bill.com that offers impressive services for managing business payments. Both of these packages come at a substantial fee now.

Goal

At this point, it makes sense for my small business and nonprofit clients to take a fresh look at the topic. Like other aspects of small business management, it makes sense to first establish a goal. My clear and specific goal is:

1. to send and receive payments for a small fixed fee
2. avoid a monthly subscription fee
3. settle within a few days (I don’t care about instant transfer)
4. get away from paper/mailed check services
5. integrate easily with the bookkeeping system

Terms and Concepts

Peer to Peer (P2P) payments bypass the payment card processors like Visa and Mastercard. This seems to be the goal since the processors charge a percentage of the transactions which is contrary to the stated goal.

Automated Clearing House (ACH) is a type of Electronic Fund Transfer (EFT). This is still the standard, most common and preferred use for business use.

Fraud will always exist and can’t be eliminated in EFT transactions. “Know your customer” is still the best advice to avoid small business fraud. Sending money (or exchanging money for non-money cards or credits) to people you don’t know is the most likely way to get caught in a fraud.

Preferred Services

I’ve used Paypal for non-profits, QuickBooks Payments, Facebook Pay, and Venmo in addition to bank payment services.

Two that I plan to use going forward: Cash App and Checkbook.io. I’ll likely report on the results and experience gained soon.