Why Your Payroll Takes 2 Days: The Hidden Life of an EFT

The "Speed vs. Cost" Trade-off

In my last post, we traced the Journey of a $1 Million Wire. It was fast, expensive, and secure.

But you don't use an armored truck to deliver a pizza. And you don't use a Wire to pay a $50 phone bill.

For that, Canada uses the EFT (Electronic Funds Transfer). It runs on the ACSS Rail (Automated Clearing Settlement System). It is the unglamorous, slow, incredibly efficient workhorse of the Canadian economy.

If you are a Product Manager building a payroll app, a lending platform, or a subscription service, you need to understand why this rail is slow—and the dangerous "Return Risk" that comes with it.

1. The Analogy: The Commuter Bus

• Wire (Lynx): A private taxi. You leave exactly when you want. You go direct. It costs $50.
• EFT (ACSS): A city bus. It costs $2. But it only leaves at scheduled times. It waits until the bus is full. It makes stops. And sometimes, it turns around and comes back.

2. The Lifecycle of an EFT (Credit)

Scenario: Your employer pays you $3,000 for payroll.

Step 1: Origination (The Bus Stop)

Time: Thursday, 9:30 AM.

Your employer's HR software creates a "Batch File." This file contains thousands of payments—yours, your coworker's, the janitor's.

• The Constraint: Unlike a Wire, this file doesn't go anywhere yet. It sits in a queue until the bank's exchange window.
• The Nightmare Scenario: Most banks have a strict cut-off (e.g., 9:30 AM) for same-day processing. If your payroll provider uploads the file at 9:31 AM, it misses the bus. Thousands of employees get paid a day late.

Step 2: The Exchange (The Hub)

Time: Thursday Night / Friday Morning.

The bank bundles all its files and swaps them with other banks during specific Exchange Windows.

• Bank A hands a file to Bank B: "Here are 50,000 payments for your customers."
• Note: No money moves yet. Just data.

Step 3: Settlement (The Payment)

Time: Friday Morning (approx 11:00 AM - 12:00 PM ET).

The banks figure out the net total (as we discussed in Clearing vs. Settlement). The Bank of Canada moves the cash.

Step 4: Availability (Money in Pocket)

Time: Friday Morning.

You wake up, check your app, and see the $3,000.

• Success: Because this was a "Credit" (pushing money to you), the risk is low. Once it's there, it's usually yours.

3. The Danger Zone: Pre-Authorized Debits (PADs)

Scenario: You pay your $100 gym membership.

This is where Product Managers get fired. Unlike Wires, which are "Push" only, EFTs can be "Pull" (Debits). This requires a Mandate (a signed agreement from the customer authorizing you to withdraw funds).

1. Step 1: The Gym "pulls" $100 from your account.
2. Step 2: The Gym's bank credits the Gym $100 instantly because they trust the system.
3. Step 3: The Return (NSF).
   • Two days later, your bank looks at your account and says: "Wait, he only has $50."
   • Banks need this time window to perform fraud checks and operational reconciliation.
   • Your bank issues a Return code (Not Sufficient Funds).
   • They claw back the $100 from the Gym's bank.
   • The Gym's bank claws back the $100 from the Gym.

⚠️ The "Good Funds" Trap

If you ship a product (like crypto or physical goods) the moment you "pull" the money via EFT, you are taking a massive risk. The money might disappear 3 days later.

4. The Myth of "Same Day" EFT

You might hear banks selling "Same Day EFT." Read the fine print.

• It works, but it is fragile.
• It usually requires you to upload the file by early morning (e.g., 9:30 AM ET).
• It relies on the "Morning Exchange" window.
• If you miss that window by one minute, it automatically becomes "Next Day EFT."

5. Summary: When to Use EFT

6. The Architect's Advice

If you are building a B2B platform:

• Use EFT for high-volume, trusted relationships (Payroll, Utility Bills).
• Never use EFT for one-off, high-risk transactions (selling a used car) unless you are willing to wait 3 days for the "Return Window" to close.