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Check out this article to learn the key differences between ACH, EDI & EFT and why it is such a common question in the world of corporate finance.
What is the difference between EFT, ACH and EDI?
The quick answer is that all ACH (Automated Clearing House) payments are EFTs (Electronic Funds Transfers), but not all EFT payments are ACH. And EDI (Electronic Data Interchange) is not a payment.
The longer explanation is that people are confused because different professions have different names for the same thing. Believe me, it took us awhile to figure out why we were getting this question because we didn’t understand that companies commonly refer to ACH payments simply as “EFT” or “EDI.”
Financial pros (accounts payable, accounts receivable, treasury, accounting, finance personnel) call ACH payments “EFT” because it’s on their trading partner contracts, forms, websites, and even invoices (e.g., “Pay by EFT at account number …..”).
Meanwhile, some refer to “EDI” as the ACH payment, which includes remittance information, because the remittance information is in EDI format. Folks in the corporate finance world all know what they mean they say “EFT” or “EDI.” But here in the banking world, we think of “EFT” as a general term that covers any method of transferring funds electronically from one bank account to another (e.g., ACH, wire, credit card, debit card, other digital/virtual currency).
“ACH” in our world specifically means the “ACH Network” – the U.S. electronic payment network that features Direct Deposit and facilitates 20+ billion consumer, business and government transactions worth $40+ trillion dollars annually, and is backed by the NACHA Operating Rules.