What is an Instant EFT?

An Instant EFT, also known as an Instant Electronic Funds Payment, is a form of bank to bank payment. Instant EFT was first developed and offered by Third Party Payments Providers (TPPs) or payment gateways to enable fast and affordable payments from a consumer’s bank account to a merchant's. Instant EFTs enable consumers to initiate transfers from their bank accounts without leaving an app or site. They also have lower fees for merchants than other digital payment methods, like card.

What makes an Instant EFT different from a manual bank transfer or EFT payment is that the payment is created automatically. There is no need for the user to manually type account numbers, bank information, references, etc. – thus reducing friction. The payment is then made using EFT (settles in 1-2 days) or RTC (settles within four hours) rails. At Stitch, our settlement times can be found in our Terms of Service.

However, the term Instant EFT has been used interchangeably with terms referring to other payment methods, and may cause confusion. Here we share more about what an Instant EFT is and its relation to Pay by bank.

Instant EFT meaning

There are a variety of payment methods businesses can offer their customers. All of them vary in terms of end user experience, customer reach, costs, security and other factors. Amongst the most popular are credit and debit card payments, bank transfers (including manual EFT), cash and recurring methods like Debit Order.

An Instant EFT enables businesses to leverage the high-security and low-cost nature of electronic bank transfers plus the convenience of card. This includes instant notification of payment initiation, refund support and, with Stitch, one-click payments for returning customers.

Real Time Clearance (RTC) vs Instant EFT

Instant EFT should not be confused with an RTC, or Real Time Clearance payment. RTC refers to an expensive and manual bank transfer method that enables quicker peer-to-peer payments. Instant EFT transfers are uniquely able to help businesses and merchants accept faster consumer payments over banking rails.

Leveraging this method, Stitch enables our clients to address a wider proportion of the population. 80% of South Africans are banked, and far fewer have credit or debit cards. In addition, Instant EFT often comes at a much lower cost than card payments – and eliminates chargeback and fraud-related fees.

Benefits of Instant EFT as an electronic payment method in South Africa

When electronic payments are made via Instant EFT:

• Businesses save significantly on fees vs card payments
• Businesses are able to fulfill orders instantly. They don't need to wait for confirmation of proof-of-payment as would be the case with manual EFT transfer
• Businesses don’t need to spend hours performing manually intensive reconciliation
• Businesses are protected against fraud and chargebacks, which is a frequent occurrence among card payments
• The payments experience is seamless for the end user and takes place in seconds for returning users with Stitch

Comparing Instant EFT with Pay by bank

SARB as well as South African banks have released some warnings about Instant EFT solutions in the past. One example is the recent SARB directive that marked a step toward regulating these types of EFT transfers and payment services. 

There are a few reasons behind skepticism around Instant EFT payments due to things like the need to ensure informed consent, a perhaps misleading conception that the payment settles instantly and concerns around data privacy or fraud. 

Stitch maintains world-class security and privacy standards. We also hold TPPP licenses with major banks across South Africa to make sure we can meet the most stringent regulatory standards. Our data privacy and management practices are also visible on our website.

Today, after seeing the interest in and uptake of Instant EFT, major banks across South Africa are launching their own versions of direct bank to bank transfers via API. The goal is for these to offer similar experiences to that of Instant EFT. We believe that as a result, Pay by bank will become the fastest growing method in the South African market. Our Pay by bank offering today encompasses both Instant EFT and direct bank APIs such as Capitec Pay.

Want to learn more about how your business can offer Pay by bank with Stitch? Get in touch at sales@stitch.money.