As we move to a more cashless society, it’s easy to assume you only need to accept credit and debit payments in your business. There was a time when people paid by check for just about everything. And most businesses still accept checks as a form of payment. But the fact is, consumers are moving farther away from carrying a checkbook and more towards digital payments every day. Now, people that want to pay by check are turning to digital eChecks to pay for products.
What does it mean for businesses to accept eChecks? It can be kind of confusing. Isn't an eCheck just a digital check? Or is it considered a digital money transfer? How is it different from an ACH payment? So without further ado, let's talk about what an eCheck is, and how accepting eChecks could benefit your business.
What is an eCheck?
An eCheck is an electronic version of a paper check. Echeck processing is a form of Electronic Funds Transfer (EFT). EFT is a term that encompasses all electronic funds transfers including eCheck, ACH, wire transfer, PayPal payments, direct deposit, and more.
They are a digital version of a paper check that is processed over the ACH network. The ACH network connects all U.S. banks and financial institutions and is responsible for transfers of electronic payments from bank to bank.
Banks use a technology called Remote Deposit Capture (RDC) to streamline the check depositing process. RDC allows the bank to deposit funds electronically with a digital image of a check. Rather than having to bring a check into the bank for deposit, merchants are able to send a digital image of the check for deposit.
How do they work?
E-Checks are simple to send and simple to accept. Businesses can easily accept eChecks from their customers online, over the phone, even over fax with an eCheck merchant account.
Customers only need to enter the proper information on the business's secure site. All they need is their bank's routing number and their bank account number they want payment to come from. Once they’ve entered the information, they’ve essentially authorized the business to draft their account for the agreed-upon amount.
This allows the customer’s bank and the merchant’s bank to communicate directly. The merchant’s bank verifies funds availability with the customers' bank and drafts the account over the ACH network.
eChecks are an affordable and convenient way for businesses to accept payments.
For businesses, accepting checks is a costly but necessary part of running a business. But they are slow to fund and there’s the chance of insufficient funds and the check won’t clear. Echecks are the answer to both of these inconveniences.
Paper checks must be taken to the bank for deposit where it can take several days for the check to clear. Because eChecks process digitally, the business has quicker access to the funds. Echecks generally clear within 24 hours.
eChecks allow ultra-high risk businesses and prohibited merchants to accept payments from their customers.
Many ultra-high risk businesses have a difficult time getting a merchant account to accept credit cards. Some businesses can't accept credit cards due to the legality of their business model.
Cannabis companies, for example, can't get a merchant account to accept credit cards legally. But they are legal businesses in their state of operation. They still need a way to accept eCommerce payments from their customers.
Tech support companies are another example of a business model that has trouble accepting payments. Acquiring banks consider tech support an ultra-high-risk business category. Many banks have tech support on their list of prohibited merchants. This means they won't give them a merchant account to accept credit cards.
Businesses such as these must find alternative ways for their customers to make payments. Enter the eCheck payment option.
There are many benefits of accepting eCheck payments in your eCommerce business.
There is no imposed cap or limit on the amount of an eCheck.
A business’s merchant account will set a cap on the amount the business can process in an individual transaction.
But customers can “write” an eCheck for whatever amount they choose. This allows businesses to accept large payments that wouldn't be possible with transaction caps set on merchant accounts.
This may not be of help to small retail outlets only accepting payments from their customers. But it's huge for B2B businesses invoicing customers for supplies. And for businesses who need to pay their supplier’s invoices.
Accepting Echecks costs less than credit card processing fees.
E-Check transactions go over the ACH network, therefore they're not subject to interchange fees. Because of this, eCheck processing is much more cost effective than accepting credit cards.
eChecks help reduce your refund requests and chargeback filings.
With an eCheck, the customer initiates the payment. This is legally seen as a clear authorization to pay instantly. Because they had to go online and enter their account information, they're less likely to dispute the charge. Credit cards have made it easy for consumers to commit “friendly fraud”. Instead of dealing with the merchant, they turn to the chargeback protections when they simply don't like a product.
Multiple payments options provide customer convenience and consistent income.
National Survey of Unbanked and Under-banked Households found that the number of unbanked households is declining. In fact, only 6.5% of households did not have a bank account when they performed the 2017 survey. With eCheck processing, all of your customers will be able to pay you and pay you consistently.
Credit cards expire, or get lost or stolen. Consumers can forget to log into their accounts to update new information. Sometimes it just takes them time to get to all the sites they're making automatic payments on. But consumers rarely change their bank account.
Open your business up to the under-banked.
While most households have a bank account, many do not have or do not use credit. According to the FDIC, 1 in 5 households in the U.S. said they “did not use mainstream credit”. While 1 in 5 may not sound like a lot, that’s 22.7 million households. And yes, if they have a bank, they most likely also have an ATM card. But some may just feel more comfortable paying with a check. Merchants who want to expand their customer base, must give customers multiple options for paying for their goods.
OK. But is accepting eChecks a secure way to accept payments?
Businesses and consumers alike must be concerned about fraud. Both should rest assured that accepting and payment by eCheck is very secure.
eChecks, as a form of EFT, are not only backed by banks, but they're also backed by the United States Treasury.
The National Automated Clearing House Association (NACHA) oversees the ACH Network, over which eCheck transactions travel. But it is regulated by the federal government.
All ACH transactions require that sensitive data be encrypted. Transactions are protected by public key cryptography to hide the true details during transit through the network.
Each eCheck transaction includes a digital signature and time stamps to ensure the eCheck cannot be duplicated.
When a customer starts an eCheck transaction, the bank account information is verified for authenticity. The information is also run through a “bad check” database to ensure there’s no link to fraudulent check writing.
In addition, All EFT transactions are governed by the rules outlined in Regulation E. The Federal Reserve Board created these guidelines in order to protect consumers when they perform electronic funds transfers.
Consumers often think they don't have any protections if they pay with an eCheck, but that isn’t so. Customers have many of the same protections they get with credit card payments. So you can put your customers at ease if they are hesitant to pay with eCheck.
Bankcard International Group has worked in the high-risk business sector for almost two decades. Over the years we’ve nurtured strong partnerships with stable payment solutions and acquiring banks. We’ve built our business on being able to offer the best solution for our client’s business needs. Not trying to fit your business into our solutions.
All our merchant advisors are highly trained and certified through the ETA’s Certified Payment Professionals (ETA-CPP) program. This is a voluntary certification that less than 2% of industry professionals seek to achieve. Through this, we’ve demonstrated a dedication to holding ourselves to the highest professional standards and integrity. We’ve gained the level of expertise required to provide the high-risk merchant services hard to place businesses deserve.
Are you looking for an alternative to accepting credit card payments? Maybe you simply want more payment options for your customers. eCheck processing could be the answer. Call one of our ETA Certified Payment Professionals today for advice on the best solutions for your needs.