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Behind the scenes of customer payments: Bank transfers

Payments | 7 mins read

Bank transfers are one of the most common payment methods across the world. This is because they are cheaper, safer and more reliable compared to other payment methods. A bank transfer is a way of transferring money from one account to another. This may sound simple, but there is a lot that takes place behind the scenes when money is transferred. 

As a business owner, it is important for you to understand the transfer process in your country, including how long it takes and why it takes that long, so that you can decide whether it is worth offering bank transfers as a payment option for your customers. 

Bank Transfers

Let’s look at some of the most common methods of bank transfers across the world and how they work.

Automated Clearing House (ACH)

What is it?

ACH payments are electronic fund transfers that take place through the Automated Clearing House network, an electronic network that processes debit and credit card transactions in the United States. This type of fund transfer is commonly used for making vendor payments, employee payments and direct deposits. ACH payments can be made in two ways:

How does it work?

How long does it take?

It takes one or two working days to receive the money in your account, since all payment and deposit requests are processed in bulk at the end of each day. 

Read more about ACH transfers here.

Direct Debit

What is it?

Direct Debit is a popular payment method in the UK. Direct Debit allows a business or person to take money from your account when a payment is due. Direct Debit is most commonly used for depositing money, paying bills and making recurring payments. 

How does it work?

In order to receive Direct Debit payments, you need to set up a mandate or a Direct Debit instruction with your customers. Your customers need to complete the mandate form, which can be done online, offline, or through telephone. Once you submit the mandate form to the bank, you will be able to collect payments within a few working days.

How long does it take?

It takes 3-5 working days for the Banker’s Automated Clearing Service (BACS), the organization which clears and settles funds, to process your transaction and for your payment to reach you.

Learn more about Direct Debit here.

SEPA

What is it?

The Single European Payments Area (SEPA) was introduced to unify payments    across Europe. There are two schemes under SEPA: the Core scheme and the B2B scheme. With the Core scheme, business owners can collect direct debit payments in Euros from customers with bank accounts in any of the 34 SEPA countries and territories. The B2B scheme is used when the transaction takes place between two businesses. 

How does it work?

Similar to Direct Debit, SEPA payments require a mandate to be signed by the customer and submitted to the bank. Once the mandate has been signed, the business owner can request payments. The communication and transfers are handled directly by the two banks involved in the transaction. 

How long does it take?

For initial payment collections under the SEPA Core scheme, you must submit the collection to the banks 5 interbank business days before the payment due date. 

For subsequent payment collections, you must submit the collection to the banks 2 interbank business days before the payment due date.

Under the B2B scheme, a collection request must be submitted to the banks 1 working day before the due date. 

Read more about SEPA here.

NEFT

What is it?

National Electronic Funds Transfer (NEFT) is an electronic fund transfer system in India. This system can be used by individuals and business owners to transfer money to any bank that participates in this scheme. There is no limit on the total amount of funds being transferred. However, each transaction cannot exceed ₹50,000. 

How does it work?

How long does it take?

Payment transactions are processed in batches every hour. The fund transfer takes place instantly, but it can take up to 2 hours from the time a payment is submitted until the batch is processed. This service is available from Monday to Saturday, from 8 AM to 6:30 PM. 

RTGS

What is it?

RTGS or Real Time Gross Settlement is a bank transfer method in India that allows individuals or business owners to transfer funds instantly. This method of transfer is available only for transactions worth ₹2,00,000 or above. 

How does it work?

When the payer initiates payment through RTGS, they have to submit the following details about the receiver to their bank.

How long does it take?

Typically, the receiver gets the funds immediately, as the transactions are processed individually in real time instead of in batches. The receiving bank will credit the amount within 30 minutes of receiving the transfer message. This service is available from Monday to Saturday from 8AM to 4PM.

IMPS

What is it?

Immediate Payment Service or IMPS is an instant electronic payment service available in India for transferring smaller amounts of money. This service is available throughout the year including bank holidays, and it can be used to transfer up to ₹2,00,000. 

How does it work?

Payments can be initiated through apps or mobile banking. The payer has to provide the following details in the app or their bank’s website. 

How long does it take?

An IMPS transfer is instant. It typically takes less than 20 seconds to reach the receiver’s account.  

Read more about NEFT, RTGS and IMPS here.

Before you decide on providing a specific payment mode, compare all the options available in your region including bank transfers to see which of the methods are worth offering. You need to consider a few important factors before you make the decision such as how long the money takes to reach you, the ease of making payments, how secure the whole process takes, and how much it costs to process the payment.

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