eChecks have become popular means of payment in both big and small businesses.
When the bottom line is the biggest consideration, businesses will always accept the most convenient payment option for their customers. eChecks are the digital versions of paper checks. They are also known as internet checks, direct debit, online checks, or electronic checks.
They use Automated Clearing House (ACH) to get debit from the checking account of a customer to the business account of a merchant. Since they are electronically transmitted, eChecks are safer, easier, and faster than traditional checks. Read on to learn more about them.
How Are They Different from Paper Checks?
Even though eChecks are a lot like paper checks, there are a few main differences. The most obvious one is that eChecks are digital. They may soon replace paper checks. Most consumers are no longer writing checks for their everyday uses. They prefer the convenience of digital payment options.
In addition, more people are now making online purchases. Therefore, the need for digital payment options is always increasing. eChecks are some of the most preferred options. In 2018, online retail sales in the United States increased 15 percent to $517 billion. The numbers are even higher now.
Another benefit of eChecks is that they do not require as much processing time as paper checks. First, the time and effort that go into depositing paper checks at the bank can be a lot. Paper checks need longer hold and processing times than eChecks. Since they occur digitally, the processing time of eChecks is very fast.
Where are eChecks Used?
In the current world, online transactions have taken over, and eChecks are more popular than they have ever been. From playing casino games to paying essential bills and shopping, people are using eChecks every day. Many online platforms are appreciating the benefits of eChecks, and the number of online activities is always increasing. Here are a few sites that accept eChecks.
The biggest benefit of shopping online is its ease and convenience. Since customers do everything from the convenience of their home or work, they are likely to buy more. After shopping, they try to find the safest and most reliable online payment method.
Since most merchants understand the benefits of echecks. They offer it as a means of payment. Even though some stores decline eChecks, most accept them. Big stores that accept eChecks include Walmart, eBay, Fashion Nova, and Oriental Trading.
Credit Cards Vs. eChecks, Wire Transfer, and EFT
The processing of eChecks is very different from credit cards. The main difference is that credit cards use card networks to process funds. On the other hand, eChecks use ACH. The processing fees on eChecks is much lower than in credit cards.
Electronic Funds Transfer (EFT) is a general term covering different types of electronic payments. eChecks is one of them. Other options include local bank transfers, eWallets, and other ACH transfers. Generally, transactions like ACH and eChecks are EFT types. However, they aren’t the only EFT transactions.
Wire transfers are meant to move money between bank accounts. They are done manually, a transaction at a time, unlike ACH transfers that happen in batches. It, therefore, makes sense that they are more costly than ACH. Another main difference is that you cannot reverse wire transfers after initiating them. They are not as secure as ACH.
eCheck Processing and How It Works
Before accepting eCheck payments, a business has to get their client’s information. This includes their checking account and bank routing numbers. The details can be obtained in person, through paper form, or online. Most modern businesses have secure sites where customers can provide this information.
The businesses use this information to communicate with their customer’s bank directly. After the funds have been verified, the direct debit is completed through ACH. The main parties involved in such transactions are: the originator, the business bank, ACH operator, and the customer’s bank.
The Benefits of eChecks
eChecks have been gaining popularity because of their benefits over paper checks. They can be considered an upgrade on a system that was otherwise insecure and unreliable. Here are a few benefits of eChecks:
1. Ease of Use and Low Costs
Even though most people now have credit cards, checking accounts are even more popular. Like paper checks, eChecks allow direct transactions without intermediaries. They don’t have the processing overhead associated with credit cards. The simplicity of eCheck transactions is unmatched.
You can avoid the stressful processes of writing a paper check, mailing it, and then waiting for it to arrive. You also get to avoid unnecessary trips to the bank. With eChecks, clients can make purchases from the comfort of their homes. With recurring payments, they can automate the ‘set it and forget it’ feature.
Credit card companies typically charge high fees for their transactions. eChecks, on the other hand, have fixed cost transactions. Processing on credit cards may cost two to five percent of the entire transaction. eChecks are different as their processing is only a micro fixed cost.
eChecks are highly secure forms of online payment. Unlike credit cards, they can’t be lost. eChecks are the fruits of a collaboration of the government, tech companies, and banks in the United States. About 20 years were invested in their research. The eCheck system is secure and well-established. It uses the latest digital signatures and public-key cryptography to promote secure payments. Since they work under the same framework as paper checks, everyone is protected.
Other security components used by eChecks include encryption, authentication, duplicate detection, and certificate authorities. Before completing the payment, the individual submitting account details must verify their account information.
Duplicate detection is a strategy that makes it easy to detect fraud. It checks for suspicious activity and duplicate transactions. Certificate Authorities offer SSL certificates and other Digital Certificates to promote secure communication and encrypt transactions. Public key cryptography is an important part of the encryption process. It is meant to protect your data while it is in transit.