Everything You Need to Know About Electronic Checks

Payment Processing
Making and receiving payments is a fundamental aspect of any business. As modern economies become increasingly digital, the ability to process electronic forms of payment has gone from being a competitive advantage to a “table stakes” feature. If a business can’t accept or issue these payments, it’s likely going to lose out to competitors who can. Nowhere is this change more apparent than in the growing usage of electronic checks, or eChecks, which have become so commonplace that many consumers don’t even know they’re using them.

What is an Electronic Check?

An electronic check or eCheck is a form of electronic payment that transfers funds directly from a checking account. Unlike a debit card, which works through a credit card issuer, eChecks use the checking account number and the bank’s routing number to send payments through the national Automatic Clearing House (ACH) network to approve the transaction. In practical terms, an electronic check is simply a digital representation of traditional paper checks. Rather than manually filling out a paper check and physically handing it or mailing it to someone, eCheck payment technology allows people to provide all the necessary payment information in electronic format and deliver it to the recipient instantly. Millions of people use eCheck technology without even realizing it. Direct deposit paychecks, online utility payments, and credit card payments are all facilitated with electronic check processing. In very simple terms, if an online payment of any kind requires a bank routing and account number, it can be considered a form of eCheck.

How eCheck Processing Works

An eCheck is one of many electronic funds transfer (EFT) technologies that businesses and customers can use to deliver and receive payments. The ACH network is central to the transfer process. Established in the 1970s, the ACH functions as a hub allowing organizations to move money between financial institutions quickly and easily. Managed by Nacha (formerly known as the National Automated Clearing House Association), it represents more than 10,000 institutions and processes over 25 billion electronic transitions each year. In order to process an eCheck payment, the payer’s banking information first needs to be entered into a payment processing portal that submits the transfer request to the ACH network. From there, the funds are electronically withdrawn from the payer’s account, delivered to the payee’s bank, and are then deposited into the payee’s account. While a receipt for the payment is generated instantly, it can take between 24 to 48 hours to verify that funds are available and three to five business days for the funds to be transferred.

Why eCheck Payment Processing Matters to Your Business

There are a number of advantages that come with using eChecks. First and foremost, eCheck processing is typically far less expensive than credit card processing. Since the payment is entirely electronic, there’s no need to bother with managing paper checks. Although there are always cybersecurity concerns surrounding any form of electronic payment, eChecks are notable for being far more secure than their paper counterparts. That’s because it’s relatively easy for physical checks to be lost, stolen, or damaged in transit. With eCheck payments, there’s no need to question whether or not someone received their funds because the payer has an electronic record of the transaction confirmation. Thanks to eCheck payment processing, businesses can transfer and receive payments much faster than they could by dealing with physical checks. That’s because they don’t have to be sent in the mail or end up sitting on someone’s desk waiting to be cashed at the local bank. They can also eliminate much of the hassle that comes from managing payments, which allows them to focus their resources on growing their company rather than sorting stacks of paper into the proper places. The faster processing speed also makes it less likely that a check will bounce due to insufficient funds. Another major benefit of eChecks is the ability to set up recurring payments. With a payment processing solution in place, businesses can pay employees and vendors, rent for property and equipment, and lenders according to a predictable schedule. This makes budgeting much easier and more transparent. The same process can be used to set up payment plans for customers and clients, making it easier for the company to collect revenue.

Manage Your eChecks with the Right Payment Processing Solution

Getting the right payment processing solution in place is critical for any business hoping to issue and receive eCheck payments. Merchant account gateways that connect to the ACH network ensure that all electronic checks will be verified to guard against fraud and other risks. Many customers prefer to use something other than a credit card to make online payments, especially for large recurring payments like auto loans, club memberships, or retainer fees. Payment processing services also allow companies to handle their own obligations more easily. When it comes to paying employees, for example, many businesses have shifted to a paperless direct deposit system to cut down on waste. The same technology can be used to handle other expenses, like tax and insurance payments. For businesses operating in high-risk industries, finding a payment processor capable of meeting their evolving needs without saddling them with burdensome fees is critical to their success. At Transcend Pay, we understand the value of flexibility when it comes to payment processing. That’s why our merchant payment gateway allows customers to process eCheck payments as easily as credit card payments. With no reserve requirements or hidden fees, our versatile payment processing services can evolve along with your business, whether you’re using our dedicated payment gateway solution, linking to our network through our robust API, or installing the innovative Tpay platform onto your existing merchant website. To learn more about how Transcend Pay can help you grow your business, contact our team today or sign up for a free demo. New call-to-action