How eCheck Payment Processing Works

Owning a business is faced with a variety of payment options. One of the oldest forms of payment after currency are checks. Today, many merchants have opted to offer echeck payment services, also known as electronic checks, to their customers.  While not as widely accepted as credit or debit cards, echecks have been steadily growing in popularity.

What is an eCheck?

online checkThis is basically an electronic version of the traditional paper checks you're used to receiving some time before, but without the hassle, the long wait, and the dangers of your own employees misplacing the check. The electronic check is processed through the ACH or Automated Clearing House network to ensure safe and effective transfer of funds between banks. It's a cheaper and easier way of dealing with checks, since you won't have to go to the bank yourself and continue to care for your business. If used properly and effectively, you might even gain more customers because of your shop's convenience.

Customers who prefer paying through online checks encode their checking account information and their preferred bank's routing number. Through a payment gateway, their information is encrypted along with the amount, and is processed by ACH. If it's approved, the funds will be transferred from the customer's account to your business account within 3-5 days.

Are electronic checks safe?

Hearing the word electronic might make you anxious about fraud and data breach, but electronic checks are safe and efficient. It’s relatively the same as the traditional paper checks, but with lesser and more convenient process. There’s no manually filling up of information on paper, and you won’t have to carry a bulky checkbook ever. And it’s actually a lot safer than traditional checks.

AFP Payments Fraud and Control Survey states that 74% of the organizations experienced fraudulent checks in 2017, while less than half are from the EFT or Electronic Fund Transfer. Since online checks are directly submitted to echeck payment processor, they will immediately investigate and compare if the information in the form is the same as the data found in the bank account. If the information is wrong, it will be declined. On the other hand, a paper check with missing information can still be processed, which can easily lead to fraud.

How do eChecks work?

Electronic check processing is not entirely different from a traditional paper check. It just happens to be way more convenient and secure. Paper checks require time and effort, plus valuable pages of papers that goes to waste after every transaction. Electronic check payments are done digitally and is processed without waiting too long and going through all the hassle of manual processing. Here are the steps on how it works:

  • Authorization. Electronic checks are safe - they require authorization from the account holder to even start the transaction. It can be done by filling out an online form, signed order form, or through a recorded phone call.
  • Set up. After confirming the authorization and the merchant finishes entering the payment information, it will eventually be processed through an online payment processing software. Recurring payments would need a recurring schedule on top of the information as well.
  • Submit. Once the information is finalized and submitted, it will start the ACH transaction process.
  • Confirmation. After it’s confirmed, the agreed amount will be automatically deposited to the payee’s checking account and deposited from the payor’s. It also sends a receipt to the customer about the processed transaction.

How do I send an eCheck payment?

Sending an eCheck is easier than you think. It only requires a short time, and that the information provided should be complete and accurate. This is especially effective for business owners when transacting with suppliers. Before you can send an electronic check, you need to know if the receiver has an ACH merchant account to complete the transaction. There are two ways you can send an online check:

  • Through online form. This would require the merchant to send you an online form asking for your account number and routing number, and the payment amount. Through submitting the form, it gives the payee the authority to withdraw the declared value from your business checking account.
  • Through call. The merchant will ask for the same information - account number and routing number, through a recorded call. They input these themselves on the online payment terminal and once they click process, the declared amount will be deducted from your checking account and deposited to theirs.

How to accept eChecks online?

Starting a business that prioritizes convenience is not that hard. You just need to find a trusted and reliable check processing provider like Allied Payments for your needs. If your business already accepts credit cards, these companies might also work with ACH processing for the existing system. Electronic check payments will definitely make it easier and more efficient for you and your customers to accept and give payments. It’s a win-win for both parties.

After finding the perfect provider for your business, you’re expected to fill out an application that includes information about expected processing volumes and how long you’ve been running your business. If there are no problems with your existing business, it will just take a few days to review and approve your application, and you’re good to go.

What types of payments can be made with an eCheck?

electronic check paymentsOnline checks are commonly used for more expensive expenses like rent, mortgage, car payments, and other monthly fees. It’s commonly used for recurring payments like monthly dues, as it saves time going to the bank and processing everything manually.

Payors are required to fill up a recurring e-check payment form for monthly dues so payees can automatically deduct the declared amount on a certain day every month. It serves as a guarantee for both parties to pay and receive the amount on time without the hassle.

How long does it take for an eCheck payment to clear?

The eCheck processes are different for each provider, but it is expected that the funds will be verified within 24 to 48 hours. If there are no problems with the payer’s check account and they have enough balance to pay, the process will only take 3 to 5 days and the funds will automatically be transferred from the payor to the payee’s account.

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