An Electronic Funds Transfer (EFT) is the automated exchange of funds and information about the funds' application to a bank account. An EFT is one form of Electronic Commerce.
Businesses are adopting EFT to transmit payments and remittance data electronically as a cost-effective alternative to check payments. Because of the increased usage by businesses, financial institutions are expanding capabilities to originate and receive financial EDI payments and process remittance information.
Most EFT transactions are conducted through the Automated Clearinghouse (ACH) system which was developed over thirty years ago as an alternative to the paper check system. This system is ideal for large volume, batch-processed payments. The ACH system supports numerous payment applications including direct deposit, consumer bill payment, and corporate trade transactions.
State Farm uses mainframe and PC-based computer systems to send payments to agents, employees, and vendors; retrieve premiums from policyholders; and transfer funds between affiliates/bank accounts.