An eCheck, also known as an Electronic Check, is an electronic financial service that has gained in popularity over the last decade. Similar to traditional paper checks. money is quickly transferred between bank accounts. In a similar manner to paper checks, money is withdrawn from the sender’s account and transferred to the receiver’s account.
eCheck is a digital reproduction of a paper check. Instead of going through all the processes and rigors of the manual payment method, an electronic check eliminates some processes and reduces hurdles by making the process completely digital.
When it comes to eCheck, there are a multitude of possibilities. Whether your company sells goods or services, an eCheck can be used to pay for them electronically. Mortgage payments, monthly rent, auto loan repayments, and legal retainer fees are all prominent examples of this type of payment. An eCheck can be used to set up a periodic payment plan, making it an ideal choice for subscription fees or membership programs. Instead of submitting a paper check each month, users can fund set up an automatic debit from their bank account.
As the number of people using checks to make payments increases, the benefits of using electronic checks continue to grow.
How does an eCheck work?
The process of an eCheck payment is similar to that of a paper check. With eCheck, you don’t need to physically write out a check, rather eCheck technology allows for checks to be filled out digitally which reduces time and paper usage.
Money is withdrawn from the payer’s checking account and directly deposited into the payer’s checking account by creating a substitute check. To authenticate an eCheck payment, the customer must agree to the terms and conditions of the website or sign a contract. Once completed, the digital eCheck is transferred to the recipient’s bank where it is handled with the same means as a physical check, only faster.
These are the steps to follow for processing an eCheck:
1. Before proceeding with the transaction, the business must first obtain the customer’s authorization. This can be accomplished through an online echeck payment form, a recorded phone call, or a signed order form.
2. After permission has been gained, the business can set up a payment. The business inputs the payment details into a payment processing system, whether it’s a one-off payment or recurring payment.
3. The business then clicks “Save” or “Submit” to begin the transaction procedure after properly entering the required information into the payment software.
4. Money will be automatically deducted from the customer’s account, a payment receipt will be sent to the customer, and the payment will be deposited into the company’s bank account. It takes a maximum of five business days for the transaction to be completed.
Information needed for eCheck processing
To have an eCheck processed, the payee must have a registered Automated Clearing House (ACH) merchant account. This allows the company to accept electronic payments. It’s simple to set up, all it requires is the following details:
- Federal tax ID number
- Business name and address
- Transaction processing volumes
- Years in business
- Bank account details
For this to work, the customer must submit all the information that would be found on a paper check. The information includes:
- Checking account number
- Bank routing number
- Payment amount
Can eChecks bounce?
Of course. An eCheck can bounce just like a paper check if there are insufficient funds in the customer’s bank account. Customers making the payment with eCheck will know when their money leaves their bank account. After you authorize a payment, the echeck clears funds are usually verified in your account within 24 to 48 hours. If you don’t have enough money in your account, the eCheck will bounce just like a regular check.
Benefits of eChecks
1. eChecks are processed faster than paper checks because the whole payment process is done online.
2. It has minimal risk in the sense that each transaction is screened and processed instantly.
3. It is very convenient.
4. Businesses and customers receive an email or a PDF file with an easy-to-save electronic confirmation of payment.
5. eCheck are safer since customers are required to authenticate the payment and the banks will verify the payment as well.
6. eCheck processing fees are frequently less expensive than credit and debit card processing fees.
7. Merchants can accept large dollar payments. Credit cards normally don’t allow payments in excess of $5,000 whereas eChecks can be for any amount even $50,000.
Impact on Costs and Revenue
A large percentage of customers today have a checking account. This means there is a sizeable section of the public who would benefit from an alternative way to draft a check.
According to researchers, if customers would choose between two products that offer the same thing at the same price, more than half of them would buy from a merchant who accepts the payment option that is more convenient for them. For many customers the option of an electronic check is ideal. While the majority of customers have credit or debit cards, many may not wish to use them online for a variety of reasons, including the following:
- On the verge of exceeding the credit card limit.
- On a tight budget and prefer to use “Pay now”.
- Lack of trust in providing credit or debit card information.
- Debit or credit card might not be at hand.
Businesses can lessen the risk of turning away potential customers by introducing other payment options to the traditional paper check payment option. The eCheck option allows these customers to pay differently, with ease and speed.
Choice, convenience, and security are all important to customers. Just like everyone wants the easy way in life, customers also want the same flexibility when it comes to choosing how to pay for services or products. Alternative online payments (i.e., those other than debit and credit cards) are predicted to circulate the whole world as technology is growing and expanding every day. To take advantage of this trend, businesses might want to explore expanding their payment alternatives. In addition to enhancing sales and customer satisfaction, providing additional payment options may create new chances for merchants to minimize their costs of payment processing.
eCheck combines the efficiency and security of electronic financial transactions with the familiarity of paper checks to provide a convenient way of sending and receiving payments. For many merchants and customers, it is a great service to offer and use.