Electronic Funds Transfer vs Wire Transfer: Which Payment Method is Ideal for Payroll

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If you need a safe, fast way to move funds, electronic fund transfers and wire transfers are great bets. Electronic fund transfers (EFTs) are any funds electronically transferred from one account to another, domestically or internationally.

A wire transfer is a type of EFT between entities across bank networks and other financial institutions. During a wire transfer, secure messaging systems send the payment instructions and the two financial institutions or banks settle the details.

Both have their benefits, but CFOs and payroll managers can choose the best option for payroll by reviewing the payroll payment process and different factors, such as the challenges of transferring payments.

The Difference Between an EFT and a Wire transfer

It can be time-consuming to dig into each transfer type and how it’ll protect your company from illegalities and fines, save your payroll team time, and how much it will cost. The chart below compares some key differentiators between wire transfer vs electronic transfers.

EFTWire transfer
Is it secure?Yes—they’re slightly more secure than wire transfers as you’re able to reverse and retrieve funds.Yes—though they cannot be reversed if bank information is wrong.
Speed levelBank will wait until it has enough funds for a batch transfer, so money may be held up.Fastest method as each transfer is an individual transaction. Good for urgent transfers.
Cost-effectivenessMinimal or zero fees. Requires minimal oversight. by bank employees and card network charges don’t apply.High fees (domestic transfers up to $50) can make wires impractical and costly for reoccuring payments like payroll.
Regulatory levelRegulated by Automated Clearing House (ACH) systems and Regulation E—a regulation for issuers of electronic debit cards.Sender and receiver’s details are typically verified with strict anti-money laundering policies. Financial instructions are sent through a secure messaging system such as SWIFT or Fedwire.
Bank AcceptanceACH payments may not work internationally. To make global payments, you need an international EFT payment system.Banks may impose a limit on the maximum transfer.
Ability to trackAble to check status of EFT payment through bank’s online banking service.Need to contact bank to track a wire transfer and provide Federal Reference number to trace and see the transactional details.

There are several kinds of EFTs. To choose the right one for your business, it’s helpful to review the options.

Types of EFTs or Direct Deposit Payments for Payroll

Companies can use EFT types from payroll debit cards to online payment systems to make payroll. Here’s a breakdown of the different types:

Payroll debit cards

A payroll card is a prepaid debit card employees can use at their discretion. On payday, your company would deposit employees’ wages on their cards for employees to use.

Payroll cards are gaining popularity. The Mercator Advisory Group research found that the amount of money loaded onto pay cards reached $40.3 billion in 2017. Unlike safer payroll methods, payroll cards can be lost or stolen.

Direct deposits

In a direct deposit, businesses pay employees electronically instead of writing a check. Direct deposits are popular with companies all over the globe because after setting the process up and collecting the employee’s information, it’s a convenient, fast, and automatic method. ​​

Though mostly secure, direct deposits are exposed to various attacks that can access your business’s databases and systems, copy the information, or lock employees out of the system.

Bank transfers

A bank transfer in relation to payroll payments is the direct transfer of funds from your company’s bank account into an employee’s. Bank transfers typically refer to domestic transfers from within the US, while wire transfers—a type of bank transfer—work between any two banks from different countries or territories.


A bank transfer is typically safe due to identity verification security requirements before the transfer. Bank transfers don’t require intermediaries other than the clearing house or financial institution, making them less susceptible to fraud. Businesses commonly use bank transfers because they’re fast, reliable, and safe.

Online payment systems

Online payment systems are platforms or companies that enable digital financial transactions. This method serves as one virtual payment account, so businesses don’t need to manage multiple local bank accounts.

Online payment systems are a common choice due to the business’s ability to fund one account in any currency and pay local currency to hundreds of locations.
There’s a small chance of hackers stealing bank or payment information, but using a secure, verified online payment system can drastically limit any risk.

Each EFT has its positives and potential liabilities and identifying each can help you optimize the payroll process.

Pros and cons of EFT for Payroll Payments

Fast, efficient, and safe. When it comes to payroll, electronic fund transfers can check all of the above, but they can also carry a few risks.

One of the most important benefits of EFTs is increased efficiency. Businesses can automate payroll payments for employees without needing to deal with paper trails or time-consuming processes. This is especially convenient when making payroll payments for employees in different countries.

If there’s a mistake with the payment, you can easily go back and reverse, retrieve, and track funds electronically (see the expert interview about manual payroll process)

EFTs can also save your company money by limiting costs of printing, mailing, and processing paper checks or paying wire transfer fees.

Lastly, EFTs provide a layer of security written checks don’t provide by manging and eliminating risks of lost or stolen checks or human errors and fraud. Some end-to-end payment technologies take full liability if anything goes wrong with payments, so businesses can master payroll on one secure platform instead of exposing itself to additional risk by using several softwares.

Despite its benefits, EFTs also come with a few potential challenges. Depending on your bank, service provider, or payment network, EFT payments can incur fees or charges. More importantly though, EFT payments can attract cyberattacks, data breaches, and technical issues that can weaken your privacy and security.

Wire transfers work differently, coming with its own advantages and disadvantages in payroll security.

Pros and cons of Wire Transfers for Payroll Payments

There are two types of wire transfers: domestic and international. Each of these wire transfer types can have different cost and delivery times.

After submitting the necessary documents, domestic wire transfers can take 4-24 hours to arrive, while international transactions allow for 24-48 hours to process, making this an efficient way to pay employees.

Wire transfers are also relatively safe. Encryption technology encrypts data sent during transmission and allows only authorized parties to access personal information while it’s being transferred from one account to another.

Additionally, many international banks use security measures such as two-factor authentication so that only only authorized individuals can complete payments from an account.

While wire transfers take less time to arrive than other methods, It’s important to note that faster, safer processing speeds may come with higher costs. Costs can vary depending on amount, bank fees, and other factors, but it’s typically more costly than EFT. When making payments to international employees, each bank fee can add up quickly.

Another drawback of wire transfers is that they cannot be reversed. This makes this method less ideal (and potentially more expensive) for recurring processes such as payroll where you cannot go back and correct amounts or retrieve funds sent to the wrong account.

For many businesses, the decision of electronic fund transfers vs. wire transfers may come down to price.

Cost Comparison

With wire transfers, companies only have two options: domestic and international. EFTs on the other hand covers a broader range of payment types from payroll debit cards to online payment systems.

For EFTs, banks may charge a fee of a $3-5 to send money between accounts at different banks, but there’s normally no fee to retrieve the money.

Fees associated with electronic fund transfers will vary by bank and by country, so if using EFTs for global employees, be sure to check the regulation of the relevant country and banking institution.

A wire transfer will cost you more than most EFT methods. Sending a bank wire transfer within the U.S. can cost between $15 to $50 and there’s typically a retrieval fee. As with EFTs, wire fees can vary among financial institutions and countries and a bank can charge one amount for sending wire transfers and another for receiving them.

When it comes to an EFT vs a wire transfer, EFTs are typically the cheapest option if businesses need to make recurring payments without sleeping on security.

Security Considerations

Since both payment methods transfer money electronically, it’s important to consider security concerns. EFTs can attract cybercriminals who get ahold of, alter, or redirect EFT transactions, causing your business financial losses, reputational damage, and legal complications.

To limit the possibility of theft and fraud, EFT payments go through rigerous tests to make sure they’re secure. EFTs often use a personal identification number (PIN), password or two-factor authentication before you can perform an action.

Similarly, when using a credible wire transfer service, each party involved in a wire transfer transaction must verify their identity with data encryptiption technolody to help eliminate anonymous transfers. Banks may also use other security measures such as two-factor authentication for wire transfers for a secure payroll process.

Which Option is Best for Your Business?

While every business has unique needs concerning payroll payments, there are a few criterion you can use to determine whether an electronic fund transfer is better for your business than a wire transfer.

For instance, factors such as company size, frequency of payroll processing, and overall payroll budget must be considered. If you’re an enterprise, you may use an EFT for regular recurring payments such as as payroll to save money on transfer fees.

An enterprise with global employees may also need more payment methods to choose from according to country, banking system, and more.

Smaller businesses who need to pay suppliers fast can opt for a wire transfer. Wire transfer costs add up quickly, however, and take a large chunk of the business owner’s wallet. Businesses of all sizes may need a wire transfer for one payment and use electronic fund transfers for others.

The bottom line is that when considering the different parameters of an EFT vs wire, it’s best practice to keep payroll process funds on one united payroll and payments platform. Schedule a demo to learn more.


Is an EFT the same as a wire transfer?

A wire transfer is a type of EFT but an EFT is not a wire transfer. An EFT includes any electronic payment method such as payroll debit cards, bank transfers, wire transfers and more. A wire transfer is when payments are sent from one bank account to another using messaging networks like SWIFT or Fedwire. They can be processed through your bank or by using a third-party money transfer service.

What is EFT in payroll?

An electronic funds transfer allows you to pay employees electronically without using paper checks. A business could use a direct deposit (a type of EFT) to electronically deposit the amount in each employee’s bank account. The direct depositor would then transfers that money to employee accounts on payday.

Is EFT the same as direct deposit?

A direct deposit is one of many types of EFTs. A direct deposit is when businesses electronically deposit an amount in an employee’s bank account. On payday, the business transfers the money into the employee’s account with the help of a secure payroll platform.

Is a payroll direct deposit considered a wire transfer?

A payroll direct deposit and a wire transfer serve two different purposes. A direct payroll deposit is good for making regular payments, such as salaries. It’s secure, efficient, and cost-effective. A wire transfer is typically used for making one-time, large payment sums to vendors or employees.