For the word "transfer" used as a verb in the sentence, "A method used by individuals to make transfer payments from one bank to another is called a demand draft," what does is mean to make transfer payments and is it a verb?
The word "transfer" as used in the quoted sentence is a noun because it is a type payment: n. a means or system of transferring. It would be a verb if you used it in a sentence such as "I want to transfer funds from one bank account to another."
A transfer payment from one bank to another would be a payment made by electronically transferring funds from one bank to another bank in payment of a debt of some kind or merely to change banks deposits.
This is done electronically, and the bank that is doing the transferring has to have the routing number of the bank receiving the funds. A good example: OneWest Bank is offering better interest rates on CDs than the Bank of America. The client opens a CD account with OneWest and instructs the B of A to transfer some or all of the funds in one of his accounts to OneWest using the OneWest's routing number. That would constitute a transfer payment.
Billions of dollars are being transferred from one institution to another every day. The old-fashioned, non-transfer way would be for the client to withdraw the funds, get a cashier's check, and mail it or hand-deliver it to the new bank.