Payment rails are the infrastructure that enables the transfer of money between banks, payment service providers, and other financial institutions. For businesses, choosing the right payment rail depends on factors like speed, cost, geography, and customer satisfaction.
NEFT (National Electronic Funds Transfer) and EFT (Electronic Funds Transfer) are widely used methods for transferring funds electronically. Lightspark is trying to move past these traditional payment rails by introducing the Money Grid, a new global payments network built on Bitcoin’s decentralized foundation.
The Payment Rail Landscape
Payment rails are crucial for moving money between parties, but current systems can be slow, fragmented, and costly, often leading to inefficiencies and higher transaction fees for businesses and consumers alike.
Understanding NEFT and EFT
How NEFT Works
NEFT (National Electronic Funds Transfer) is an electronic payment system in India that processes transactions in hourly batches. It operates through a centralized clearing center maintained by the Reserve Bank of India (RBI). The process involves the sender initiating a transaction via internet or mobile banking, adding the beneficiary’s details, and authenticating the transaction. The sender’s bank sends the details to the NEFT clearing center, which sorts and batches transactions. Settlement files are then sent to the beneficiary’s bank, which credits the funds to the beneficiary’s account. Both parties receive confirmation messages, ensuring transparency and security.
Strengths and Limitations of NEFT
Strengths
- NEFT allows for the transfer of funds electronically between bank accounts without any minimum or maximum transfer value, making it suitable for both small and large transactions.
- It is available 24/7, every day of the year, providing flexibility and convenience for users to initiate transactions at any time.
- NEFT transactions are secure, with strong authentication mechanisms and confirmation messages sent to both the sender and the beneficiary after a successful transfer.
Limitations
- NEFT transactions are processed in hourly batches, not in real-time, which can result in delays compared to instant payment systems like IMPS or UPI.
- Each bank may set its own transfer limits for NEFT transactions, which can vary and affect the maximum amount transferable.
- NEFT is only available for NEFT-enabled bank accounts and branches, limiting its accessibility to certain users.
How EFT Works
An Electronic Funds Transfer (EFT) is a digital money movement from one bank account to another, independent of bank employees. The process involves the sender initiating a transfer via digital networks like the Internet, payment terminals, or ATMs. The sender’s bank processes the request and transfers the funds electronically to the receiver’s bank, which credits the recipient’s account. EFT uses secure digital communication channels and automated systems, ensuring a seamless transaction flow. Most payments are completed within a couple of days, though some methods, like ATM withdrawals, are instant.
Strengths and Limitations of EFT
Strengths
- EFT transactions are fast and reliable, with most payments cleared within a couple of days.
- They are cost-effective, eliminating the need for paper checks and reducing manual intervention.
- EFTs are secure, reducing risks associated with paper and cash transactions, and are accessible globally.
Limitations
- Some EFT methods, like ACH, can take an extra day or two due to additional security steps.
- International EFT payments may incur foreign transaction fees and exchange rate costs.
- EFT requires accurate setup details, such as bank account information, which can be a barrier for some users.
NEFT and EFT Compared
Transaction Speed
NEFT transactions are processed in hourly batches, meaning funds are credited within a few hours depending on the batch timing. In contrast, EFT encompasses various methods with varying speeds; some are real-time (e.g., IMPS), while others, like ACH, may take a couple of days. Lightspark offers instant, real-time transactions, providing a significant speed advantage over traditional methods.
Fees
NEFT fees are nominal, typically ranging from Rs 2.50 to Rs 25, depending on the transaction amount and the bank. EFT fees vary widely based on the specific method and bank, with some methods like UPI being free for person-to-person transfers. Lightspark emphasizes low-cost payments, eliminating hidden fees and reducing costs significantly.
Cross-Border Capabilities
NEFT is primarily used for domestic transactions within India and does not support international transfers. EFT, as a broad term, includes methods like SWIFT and wire transfers that facilitate cross-border transactions. Lightspark excels in this area, enabling seamless, low-cost, and reliable payments across 140+ countries.
Security Protocols
NEFT is highly secure, regulated by RBI guidelines, ensuring robust security measures. EFT security varies by the service provider and type, with each method having different standards. Lightspark leverages Bitcoin’s decentralized foundation, offering strong security properties and built-in compliance for global transactions.
Operational Hours
NEFT is available 24/7, including holidays, but transactions are processed in batches. EFT operational hours depend on the specific method; for example, IMPS and UPI are available 24/7, while others like ACH are limited to business days. Lightspark provides continuous, uninterrupted financial operations, enabling 24/7 payments globally.
How NEFT And EFT Are Used
Salary Payments
NEFT is ideal for scheduled salary payments due to its batch processing and cost-effectiveness. EFT, particularly direct deposit, offers similar benefits but may take longer. Lightspark enables instant, low-cost salary disbursements globally, enhancing liquidity and employee satisfaction.
Bill Payments
NEFT is suitable for routine bill payments, providing security and traceability. EFT methods like UPI offer real-time payments but may incur fees. Lightspark’s instant, low-cost transactions ensure timely bill settlements, reducing late fees and improving cash flow management.
Cross-Border Transactions
EFT methods like SWIFT facilitate international transfers but can be slow and costly. NEFT is limited to domestic use. Lightspark excels in cross-border payments, offering instant, low-cost transfers across 140+ countries, making it ideal for global business operations.
Emergency Fund Transfers
For urgent transfers, EFT methods like IMPS are preferable due to real-time processing. NEFT’s batch processing may cause delays. Lightspark’s real-time, 24/7 payments ensure immediate fund availability, crucial in emergencies, enhancing financial resilience.
Time for a New Standard
Lightspark is a global payments infrastructure provider that enables real-time, cross-border money movement using Bitcoin, fiat, and stablecoins. Unlike NEFT and EFT, Lightspark offers instant, low-cost, and secure payments without delays or hidden fees.
- Built on Bitcoin: Lightspark’s infrastructure leverages Bitcoin’s decentralized foundation, providing a secure and open global payments network.
- Instant Settlement: The platform supports real-time payments, allowing money to move instantly across borders and currencies.
- Lower fees: Lightspark reduces the cost of transactions significantly, eliminating hidden fees and offering low-cost payments.
- Cross-border security by default: The platform ensures secure, reliable cross-border payments, leveraging Bitcoin’s security properties and compliance-ready solutions.
A Modern Infrastructure
For businesses looking to transcend traditional payment systems like NEFT and EFT, here’s what Lightspark brings to the table:
- Wallets: Lightspark's wallet solutions enable the creation of feature-rich digital wallets with flexible custody options, supporting Bitcoin, Lightning Network, stablecoins, and domestic payment rails.
- Digital Banks: Lightspark connects digital banks to the Money Grid, allowing them to access a global, open money network for rapid expansion, real-time payments, and low fees.
- Exchanges: Lightspark provides exchanges with the tools to power instant Bitcoin movement, reducing costs and ensuring compliance with built-in AML and reporting tools.
- Stablecoins: Through Spark, developers and businesses can create, distribute, and monetize stablecoins on the Bitcoin network, offering fast, cheap, and user-friendly financial applications.
Emerging technologies and evolving regulations are transforming the future of payments. Lightspark offers real-time, low-cost global payments, leveraging Bitcoin’s decentralized network. Don’t just choose between two outdated options—upgrade to a payment rail built for the internet age. Learn more or book a demo.
