Overview

The Electronic Funds Transfer (EFT) payment rail in Canada, managed by Payments Canada, serves as a fundamental payment infrastructure for money movement. It plays a critical role in facilitating various financial transactions, including direct deposits, bill payments, and business-to-business transfers. The EFT payment rail provides a standardized framework for exchanging electronic payment messages, ensuring interoperability across different financial institutions. Integrating with Synctera’s EFT service presents an opportunity to enhance the efficiency of electronic fund transfers, offering you a reliable and streamlined experience within the Canadian financial landscape.

What is an EFT Transaction?

Electronic Funds Transfer (EFT) in Canada refers to a digital transaction mechanism where financial institutions electronically exchange standardized messages containing details such as payer and payee information, transaction amount, and a unique identifier, facilitating the secure and efficient transfer of funds between accounts. It adheres to specifications like standard 005 and standard 007, ensuring a standardized format for message exchange and promoting interoperability among participating financial entities.

How Does Synctera Support EFT?

From the outside, the EFT workflow may seem simple but it’s actually quite complex. This is where Synctera comes in. Synctera works with your sponsor bank to serve as your connection to the Payments Canada Network and supports sending and accepting EFT transactions from other financial institutions.

In EFT terms, Synctera acts as the Originating Direct Clearer when it comes to originating transactions and Processing Direct Clearer when it comes to receiving them. That means we take care of all the batch processing and file generation while ensuring that all transactions are reflected in your customer account balances.

What are the types of EFT transactions?

Electronic Funds Transfer (EFT) encompasses a variety of transaction types, each serving different financial needs and scenarios.

There are four types of EFT transactions:

1. Outgoing EFT Credit (Direct Deposit)
2. Outgoing EFT Debit (Pre-Authorized Debit)
3. Incoming EFT Credit (Direct Deposit)
4. Incoming EFT Debit (Pre-Authorized Debit)

Outgoing EFT

Outgoing EFTs are electronic payments or transfers initiated by your fintech on the Synctera platform to send funds to an account in another financial institution. These transfers can be either debits or credits. Synctera is acting as the Originating Direct Clearer, sending EFTs to the other financial institution via your sponsor bank.

Outgoing EFTs involve a Synctera customer account and an external account that represents the account on the other financial institution.

Outgoing Credit

In an outgoing credit, the Synctera customer account will have funds debited and the external account will have funds credited, i.e. funds are sent out from the Synctera customer account. This transfer is analogous to pushing funds to an external account.

EFT credits are sometimes refered to as Direct Deposit transfers.

Outgoing Debit

In an outgoing debit, the Synctera customer account will have funds credited and the external account will have funds debited, i.e. funds are added to the Synctera customer account. This transfer is analogous to pulling funds from an external account.

EFT debits are sometimes refered to as Pre-Authorized Debit (PAD) transfers.

Before performing an outgoing debit, you must complete a Pre-Authorized Debit (PAD) agreement, where the account holder specifies details like the amount, frequency (e.g., monthly, quarterly), and duration of the debits. This agreement must be in compliance with Payments Canada Rule H1. Please reach out to [email protected] to receive a template for PAD agreement

Incoming EFT (coming soon)

Incoming EFTs are electronic payments or transfers that are sent another financial institution and received by Synctera. These transfers can be either debits or credits. Synctera is acting as the Processing Direct Clearer, receiving EFTs from the other financial institution via your sponsor bank.

Incoming Credit (coming soon)

When Synctera receives an incoming credit, the customer account on the Synctera platform is credited and the account on other financial institution is debited. These transfers are analogous to pushing funds to a Synctera customer account.

Incoming Debit (coming soon)

When Synctera receives an incoming debit, the customer account on the Synctera platform is debited and the account on other financial institution is credited. These transfers are analogous to pulling funds from a Synctera customer account.

How accounts are funded using EFT?

Once your customers have an account setup, they’ll need to fund their account
by originating an outgoing debit EFT transaction to be sent to their account at
another institution. Synctera refers to this as an external account.

If you have just created a Synctera customer account, lets call this acount B, on the Synctera platform and you want to add
funds to it from account A, an external account at another financial institution, it’s natural to
assume that funding involves pushing funds from account A to account B.
Instead, funding your customers account involves originating an outgoing debit EFT transaction with your Synctera account in order to withdraw funds from the
external account.

How do I get started with sending/receiving EFT transactions?

Step 1: Customer Creation

1.1 Create a Customer

Any individual wanting to transact on the Synctera platform must be stored as a
customer in our system. This includes completing the KYC process.
See the Customer guide for details.

Step 2: Account Creation

2.1 Create an Account

In order to send and receive EFT payments you need to create an account
and associate it with your customer. See the Account Guide for details.

2.2 Create an external account

In order for your customers to fund their accounts they’ll need to debit funds
from an account at another institution. You’ll need to create an external
account resource on the Synctera platform which serves as the local representation of
the account to be debited. See the External Account Guide for details.

2.3 Verify the external account using Plaid, Finicity or manually.

2.4 Sign and append PAD agreement. Contact [email protected] for assistance with this step.

Step 3: Send/Receive an EFT

3.1 Send an EFT request

Once the external account has been verified, EFT transactions (credits and
debits) can be originated from your customer’s account.
Refer to the API Refernce for details on the API request properties.

3.2 Receive an EFT transaction (coming soon)

As long as your customer has an account that is both active and verified,
there is no work required by you or your customer to receive EFT transactions.
Synctera will process the incoming transaction and credit/debit the account
accordingly.

What happens after I send an EFT request?

After you send a request to originate an EFT transaction, the transaction is
placed in a batch which, in turn, is placed in an EFT file to be sent out over
the Payments Canada network. Depending on the time that you originate the transaction there may be some delay between the time the transaction is created and the time the file is sent. This is done to align with the processing schedule set by Payments Canada. The date the transaction is sent will ultimately determine when funds are settled across accounts and institutions. It will also have a bearing on if and when an EFT transaction can be returned by the
recipient.

How long does it take to process an EFT Transaction?

The time it takes for the network to completely process an EFT transaction is dependent on a number of variables. The operating schedule of Payments Canada, the operating schedule of each bank, and the time of day the transaction was created are all key factors in determining when a transaction will settle. Integrators can influence the timing of an EFT transaction by setting the is_same_day field to true when posting a request to send a transaction. However, even when sending “same day” EFT transfers, there are a couple of things to keep in mind:

1. Transactions can be returned up to 2 business days after the settlement day. This introduces risk for integrators who choose to make funds immediately available to account owner who have initiated a PAD request. The EFT system operates on a “no news is good news” basis. The absence of a return within the 2-day timeframe typically means that the transaction has been accepted.
2. “Same day” EFT is only available within certain transmission windows set by Payments Canada and dependent on your sponsor bank. In general, transactions submitted (Mon-Fri) by 19:30 EST are eligible to settle on the same day. “Same day” is not available on non-banking days (weekends and holidays) and will automatically default to the next available “banking day”.
3. EFT transactions can be “future dated” by setting the effective_date to some date in the future.
4. Submitting incorrect information may cause processing errors that result in delays. Errors may also increase the likelihood of a transaction being returned.

Refer to this table for your sponsor bank and their cutoff windows. Transfers made before or between these times are guaranteed to be delivered for that day. same_day EFT transactions created after the last cut off time will be delivered on the first window of the next banking day

Why would an EFT transaction be returned?

EFT transactions can be returned for a variety of reasons. Insufficient funds, account closed,transaction limits exceeded, incorrect account information, authorization revoked and system issues. Synctera will take care of processing any returned transactions and the customer account will have its balance reflected correctly. To avoid returns make sure to cover the following items:

1. Sufficient Funds:

• The sender's and recipient's account should have sufficient funds to cover the amount of the EFT. Ensure that the account has a balance equal to or greater than the transaction amount, including any associated fees.

2. Account Validity:

• Confirm that the sender's and recipient's account is valid and active. Closed or dormant accounts can lead to EFT returns.

3. Correct Account Information:

• Double-check and verify the accuracy of the recipient's account information, including the account number and routing number. Any discrepancies can result in a return.

4. Authorization:

• Ensure that the EFT is authorized for the sender and recipient accounts. Unauthorized transactions may be subject to return.

5. Confirmation of Recipient Information:

• Verify that the recipient's information such as payee name etc. matches the intended payee. Any mismatch could result in the EFT being returned.

6. Verification of Receiver's Account:

• If possible, verify with the recipient that their account is active and able to receive funds. This may help prevent returns due to account-related issues on the recipient's end.

What Are Transaction Codes?

Transaction codes are integral across various transaction types, including Pre-Authorized Debits (PADs), as well as incoming and outgoing EFTs. These codes provide a standardized way to categorize and identify transactions, facilitating efficient processing, tracking, and reporting. Below is an overview of how these codes are typically applied across different EFT categories:

Debit Transaction Codes

200-229 and 300-599 Series (Consumer PADs): Used for regular, variable, and one-time debits from personal accounts. Examples include recurring mortgage payments (370), fluctuating utility bills (430), or occasional insurance premiums (330).

400 Series (Business PADs): Applied to business-related debits, such as regular vendor payments (400), variable supplier invoices (401), or one-time transactions (402).

Credits Transaction Codes

Credit Transaction Codes: These codes identify various types of deposits into an account. They might include direct deposits from employers, electronic transfers from other accounts, or government benefit deposits. Specific codes within this category help in distinguishing the nature and source of the credit. For example payroll deposits (200) or dividend (250).

Return and Error Handling Codes

R-Series Codes: These are critical for managing errors and returns in EFT transactions. Common codes include R01 for Non-Sufficient Funds, R02 for Account Closed, R03 for No Account/Unable to Locate Account, and R04 for Invalid Account Number. These codes are universally important across PADs, incoming, and outgoing EFT transactions for addressing and rectifying transaction failures or issues. These codes range from 900-990.

Please refer here to more details

Example: Funding a customer account

Before running this example, please ensure you have your Synctera API Keys set up.

To fund a Synctera customer account from an external account your request would be:

curl --request POST \
     --url https://api-sandbox.synctera.com/v0/eft_ca \
     -H "Authorization: Bearer {API_KEY}" \
     -H 'Content-Type: application/json' \
     --data-binary '{
{
  "dc_sign": "DEBIT",
  "amount": 10000,
  "customer_id": "46fec39e-e776-4571-bf90-d0e1d15172fe",
  "transaction_code": "450",
  "destination_account_id": "fccb4a46-1261-4e91-b622-73b5b946183d",
  "destination_account_owner_name": "Jane Smith",
  "is_same_day": true,
  "originating_account_id": "b01db9c7-78f2-4a99-8aca-1231d32f9b96",
  "originating_account_owner_name": "John Doe"
}
'

It is important to note a few things in this example:

1. The dc_sign is always from the perspective of the receiving account. So a dc_sign value of DEBIT to the receiving account results in a credit to the originating account. A DEBIT value states this transfer is an outgoing pre-authorized debit and a CREDIT states the transfers is an outgoing direct deposit. Read What are the types of EFT transactions for more info.
2. The amount is always in the smallest units of the given currency. In this case, the currency is CAD, which means the amount is in cents so 10000 cents is 100 dollars.
3. The customer_id indicates the person that is making the outgoing EFT request. This customer must be an account holder or authorized signer of originating_account_id. The customer must be ACTIVE, the account must be ACTIVE_OR_DISBURSED, the external account information must be valid and status must be ACTIVE
4. transaction_code states the EFT transaction code see the What Are Transaction Codes? section for the correct values. In the example code 450 represents miscellaneous payments.
5. The destination_account_id always refers to an external account.
6. The originating_account_id always refers to to a customer account.