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Worldpay Editorial Team
July 08, 2019
For small business owners, the bottom line is always top of mind. And one way to keep money flowing in is to accept the payment types that are convenient for both businesses and their customers. eCheck is one.
eCheck is a digital version of a paper check and is also known as an electronic check, online check, internet check, and direct debit. eChecks use the Automated Clearing House (ACH) to direct debit from a customer’s checking account into a merchant’s business bank account, with the help of a payments processor.
eChecks are transmitted electronically, making transactions quicker, safer and easier. Read on for more info.
While eChecks are digital, paper checks are, of course, paper, and likely to become obsolete in the future. Fewer consumers are writing checks for everyday purchases or home expenses, preferring the convenience of digital payment types including eChecks.
Additionally, more purchases are made online, inspiring new digital forms of payments that occur invisibly, effortlessly, and quickly. Online retail sales in the US were up , and are expected to continue to gain a larger share of overall commerce.
eChecks also take less time to process than paper checks. There are a few reasons why: 1) the time and manual effort it takes to deposit paper checks at a bank; 2) paper checks require longer processing and hold times than eChecks; and 3) eChecks occur digitally, which speeds up the process.
eCheck processing works a bit differently than credit card processing. The biggest difference is that eCheck uses ACH to transfer funds instead of the card networks, so processing fees are lower. There are no credit card interchange fees for eCheck acceptance and fees can be as low as 10 cents per transaction. This can make a big difference to businesses that accept large or recurring payments.
EFT stands for electronic funds transfer. It’s an overarching term that covers several types of electronic payments including eCheck, ACH transfer, wire transfer, PayPal payments, direct deposit, SEPA payments, local bank transfers, and eWallets. Basically, transactions like eChecks and ACH are types of EFT, but not all EFT transactions are eChecks and ACH.
Wire transfers move money from one bank account to another. Unlike ACH transfers which take place in batches, wire transfers happen manually, one transaction at a time. Because of this, wire transfers cost more than ACH. Another distinct difference is that, unlike ACH, wire transfers cannot be reversed once initiated, and are thus considered less secure than ACH.
In order to accept eCheck payments, a business must first obtain the customer’s information including their bank routing and checking account numbers. This information can be obtained online, by phone, or in person via a paper form. Most businesses today have websites and can provide a secure form page for this customer information.
Using this information, the merchant’s bank can communicate directly with a customer’s bank. Once the funds are verified, the direct debit happens via ACH.
A lot of money is passed through ACH annually. To illustrate the volume, consider that in Q1 2019,grew 5.8% over Q1 2018.
While ACH funds have taken a few days to post in the past, the National Automated Clearinghouse Association (Nacha) that oversees ACH, has enabled new capability that now makes same day funding possible.
Yes. eCheck payments help businesses keep payments coming in because checking account numbers rarely change as often as credit card numbers, so there’s less likelihood for payment breakage.
While eCheck acceptance can be good for any type of business, the payment type is especially well suited to the following:
From music to memberships to magazine subscriptions, eChecks make recurring payments, autopay, and auto-renewal easy and convenient for businesses and their customers. Any business with a subscription-based model, whether an online tea-of-the-month club or a health club with monthly fees, would do well to consider electronic check payments.
A business can sell a customer on their product once, and continue to collect monthly, sometimes for years. It’s the most efficient sales model out there, and it’s been exploding online over the past few years.
With ACH moving the funds for eChecks, banks talk directly to other banks. By eliminating the middlemen involved in processing credit card payments, businesses save money by avoiding interchange fees. If your business regularly processes payments in the hundreds or thousands of dollars, you can potentially save a significant amount of money by accepting electronic check payments.
Following are five major security components for eCheck transactions:
In order to accept eChecks, a business must work with a payment processor or payments gateway, and a financial institution that can facilitate this type of transaction. The type of hardware and software needed depends on the way eChecks will be accepted.
For example, if a merchant want to accept eChecks at the point of sale, they will need a check scanner. If they want to accept eChecks online, they will need payments software equipped to accept this payment type.
The more payment options a customer has, the more likely they are to spend their money and return to the business. By accepting eChecks, a business naturally expands its revenue potential.
To find out more about electronic check payment processing, talk with your bank and your payment processor. They can help you decide if it’s the right time to incorporate eChecks into your mix of payments and how to maximize this payment type.