What are eChecks and How Do Businesses Accept Them?
An electronic check has many names - eCheck, direct debit, direct deposit, and online check are just a few. And while credit cards have been the default payment method for businesses for over a decade, this new alternative is making headway. And for good reason.
Essentially a form of ACH processing, eCheck Processing enables customers to pay you directly from their bank account using their secure online banking login. How popular is it? The Automated Clearing House processed 29.1 billion payments in 2021 alone, with this payment method growing consecutively for seven years. Your customer can authorize a one-time or recurring payment as quickly as a credit card transaction.
But that's not all. Electronic checks are, by large, used entirely online. A customer or merchant can even take a picture of their paper check and upload it to their payments portal, and the bank will initiate an ACH transaction after "reading" the check. But you don't even need the flimsy, outdated piece of paper in most cases.
So, why are so many businesses adopting eCheck payments? It's easy to see the advantages.
Benefits of eChecks
eChecks are gaining popularity, mainly because they update a very secure and dependable system - regular paper checks. What's happened is that Nacha has found a way to turn checks into a seamless ACH payment.
An eCheck transaction can be completed within a few days, if not instantly. Furthermore, the bank account and its amount are verified before completing the transaction. Without requiring a physical check, the payment portal will log each step of the eCheck transaction, creating an auditable trail. As a result, AR teams no longer need to worry about bounced checks or late payments.
To get a better understanding of all the benefits of electronic check payments, here are the top 3 ways businesses benefit from accepting an eCheck payment:
1. Reduce payment processing costs ASAP
Unlike credit card payment networks, which charge a percentage fee per transaction, eChecks are usually fixed-cost transactions. Credit card processing across the industry usually costs between 2% and 5% of every transaction, while eCheck processing is fixed monthly. Imagine how wasteful it is for a typical $10,000 B2B invoice to be charged a standard 3% from a credit card company. That would be $300 just to get paid a single invoice! Processing an electronic check would be a tiny fraction of that cost.
And that's just the direct expense of using a physical check or credit card payment versus an eCheck. There are many indirect costs, such as the time wasted manually processing physical checks or dealing with returns with card payments. Meanwhile, an electronic funds transfer is automatic, seamless, and safe.
2. Process payments easier than with check and credit card payments
As universal as card payments are, almost everyone has a checking account. Around 95.5% of American households have at least one checking account, while only 71.5% have a credit card. In addition, not every business wants to use a credit card. Many businesses recognize several risks attached to a company card, including fraud.
Meanwhile, an eCheck is just like a paper check in that it enables a direct transaction between two parties without all the intermediaries and processing overhead of credit cards. eChecks bring that simplicity to the Internet and improve upon paper checks with convenience and added security.
For many businesses, this form of ACH payment processing is a no-brainer. It's secure, fast, and easy.
Instead of the hassle of writing and mailing a paper check, waiting for it to arrive, endorsing it, and depositing it at the bank, eChecks lets your customers pay you from the convenience of their home or office. The funds are automatically credited to your bank account. eChecks can also be automated for a "set it and forget it" recurring payment.
In other words, electronic payments create a seamless experience for your team and your customer.
3. Safeguard your transactions
eChecks are one of the most secure forms of online payment. Unlike credit cards, an eCheck cannot be lost or stolen, and due to bank account verification, it's much harder to commit fraud using electronic checks. This modern payment method results from 20 years of research and collaboration between banks, tech companies, and the U.S. government, intending to optimize the well-established checking system for the modern Internet.
The eCheck system uses state-of-the-art public-key cryptography, digital signatures, and additional security measures to send payments securely. Because eChecks are based on the same legal framework as regular checks, merchants and consumers are well protected when using an eCheck transaction.
Start Accepting Electronic Funds with an eCheck Payment Gateway
Accepting eChecks with PayStand takes only a click. Simply turn on the eCheck payment rail in your PayStand dashboard.
You can also offer eChecks alongside credit cards or as an exclusive payment option. You can even discount eCheck transactions, and the PayStand checkout will display the savings for your customer. Or, you can push credit card convenience fees to encourage eCheck or ACH transactions.
Interested in how accepting eChecks can help your business? Read our Guide to Understanding ACH and eChecks to use this payment method and improve your cash flow.