How EFT files and pre-authorized debits move money in Canada

EFT is Canada's batch bank-to-bank rail, the counterpart to US ACH. An originator such as an employer or a biller hands its bank a file of AFT entries: credits push money out, the way payroll direct deposit works, and debits pull money in under a signed pre-authorized debit (PAD) agreement, the way bills and subscriptions work. The entries are exchanged between the banks through the ACSS, Payments Canada's retail batch clearing system, and the receiving bank posts them so pay typically lands on the due date. The interbank money moves separately: the ACSS tallies what each institution owes on a net basis, and those positions settle the next business day across settlement accounts at the Bank of Canada.

The flow at a glance

money (funds move) message (instructions) exception

Who’s involved

Originator: The employer or biller who starts the run: pushing payroll credits or pulling PAD debits
Originator's bank: Takes in the AFT file and enters the items into clearing; settles at the Bank of Canada as a direct clearer
ACSS (Payments Canada): Canada's retail batch clearing system, which exchanges the entries and tallies each institution's net position
Receiver's bank: Posts each entry to the customer's account: a credit lands, a debit is drawn
Receiver: The employee being paid or the customer whose account is debited
Bank of Canada: Holds the settlement accounts where the banks' net positions become final

How it moves, step by step

1
messageOriginator
The originator builds the payment run, one entry per payment, marked as a credit (push money out, like payroll) or a debit (pull money in, like a monthly bill). A debit needs a signed pre-authorized debit (PAD) agreement from the customer first.
2
messageOriginator's bank
The originator's bank packages the entries into an AFT file (Payments Canada's Standard 005 format) and enters the items into clearing, typically a day or two before the due date. This is a records exchange, not money moving.
3
messageACSS (Payments Canada)
The entries are exchanged between the banks through the ACSS, which tallies each institution's multilateral net position: one number per bank for what it owes or is owed. Still instructions and arithmetic, not cash.
4
messageReceiver's bank
The receiver's bank gets its entries ahead of the due date and prepares to post them.
5
moneyReceiver's bank
On the due date the receiver's bank posts the entries: the employee's pay is typically available that day, and the PAD is drawn from the bill payer's account.
6
moneyBank of Canada
The next business day, the banks settle their ACSS net positions in central bank money, across the Lynx settlement accounts they hold at the Bank of Canada. This interbank movement is when the money becomes final between the institutions.
7
exceptionReceiver's bank
If a debit fails, for example insufficient funds or a closed account, it is returned through the ACSS and the biller misses the collection. A personal payor can also have their bank reimburse a PAD that lacked valid authorization within 90 calendar days under Payments Canada's Rule H1.

money: funds actually move message: instructions, no money yet exception: reversal / dispute

When it’s final

Batch and deferred-net, not real time. Recipients are typically paid on the due date, but the interbank money moves once a day: the ACSS nets each institution's position and settles it the next business day across settlement accounts at the Bank of Canada. Returns mean a posted debit can still bounce back afterward, and an unauthorized personal PAD can be reimbursed up to 90 days later.

Common misconceptions

Myth: My pay arrives by Interac e-Transfer; it is all the same system.
Reality: Different rails. Payroll and government deposits, and PAD bill payments, are EFT: batch AFT files cleared through the ACSS. Interac e-Transfer is a separate alias-addressed transfer that feels immediate; EFT runs on files, due dates, and next-day net settlement.
Myth: When the deposit shows up in my account, the money has already moved between the banks.
Reality: Posting and settlement are separate steps. Your bank credits you on the due date, but the banks settle their net ACSS positions the next business day at the Bank of Canada. Availability to you and finality between the banks are not the same moment.
Myth: EFT is just the Canadian name for ACH, so everything works the same as in the US.
Reality: It is the closest counterpart, but the plumbing differs: Canada has one clearing system (the ACSS, run by Payments Canada) rather than two competing ACH operators, files follow Payments Canada's Standard 005 rather than Nacha's format, and net positions settle at the Bank of Canada. PADs also carry their own protections under Rule H1, like the 90-day reimbursement for a personal debit without valid authorization.

See it in the studio

Show a Canadian payroll run as an EFT direct deposit: the employer's AFT credit file clearing through the ACSS, the employee paid on the due date, and the banks settling net the next business day at the Bank of Canada.Credit (push) example on the batch rail.Map a monthly pre-authorized debit pulling a utility bill from a chequing account, including an NSF return.Debit (pull) example with the return path.EFT direct deposit through ACSSAudited template, loads instantly Pre-authorized debit (Canada)Audited template, loads instantly

Terms in this guide

EFT / AFT File Pre-Authorized Debit (PAD)ACSS (Automated Clearing Settlement System)Lynx Clearing Settlement

Sources

Retail batch payment system (ACSS) ↗ · Payments Canada (operator). Operator detail on the ACSS: what it clears (direct deposits, pre-authorized debits, cheques, bill payments) and how net balances settle.
Pre-authorized debits and Rule H1 ↗ · Payments Canada. PAD agreements, cancellation, and the 90-day reimbursement for an unauthorized debit.
Core functions: financial system and settlement ↗ · Bank of Canada. The Bank of Canada provides settlement accounts for Payments Canada's systems and oversees them.

Educational, plain-English explainers. Not legal, compliance, tax, or financial advice. These cover fundamentals, not current fees, limits, or rates (which change). Rails and parties vary by program and country, so verify specifics against primary sources. Last reviewed June 2026.