How Do eChecks Actually Work?

An eCheck or electronic check payment essentially amounts to a digitized version of a traditional paper check payment. It’s also referred to as an internet check, an online check, and a direct debit. The latter because it uses the Automated Clearing House (ACH) network to directly debit the payment amount from the payer’s checking account and credit it to the payee’s bank account.

The ACH a major electronic funds transfer system in the United States. It processes transactions for businesses, consumers, and governments nationwide. Most electronic check payments transferred over the ACH network can take up to 72 hours to show up in the receiver’s account. However, with SeamlessChex’s eCheck processing platform, merchant account holders see fast, next-day deposits of customer payments.

Moreover, eChecks are a cheaper and more reliable alternative as well. Not only is ordering a paper checkbook relatively expensive, consider the value of employee time invested into writing, mailing, depositing, and reconciling paper checks. There’s also no chance of an electronic payment being lost in the mail, given how eChecks work.

Increasingly, businesses are preferring newer forms of online financial transactions, including by electronic check payments, to improve the purchase and transaction experience for their customers. It’s not surprising when you realize that retail e-commerce revenue in the U.S. is expected to amount to over $563 billion by 2025, and that e-commerce is increasingly accounting for a much larger share of the retail pie. According to the U.S. Census Bureau, e-commerce sales made up 14% of total sales by the end of 2020, an increase of over 32% from the year before.

How Do eChecks Work?

Electronic check payments are processed more or less the same way as paper checks, except it happens a lot faster. With traditional checks, you usually have to wait for them to arrive in the mail, then deposit them and wait for them to clear the network. EChecks help you cut short that process by letting you do it all digitally. Here’s a brief primer on how eChecks work during processing.

1. Authorization
2. To begin with, the payer or customer needs to have authorized the business to charge them electronic check payments to ensure the transaction is valid. This includes obtaining your customer’s checking account and bank routing numbers. It can be done in a number of ways, including by filling out an online form, a signed contract, accepting terms and conditions on a website, or even over the phone.
3. Payment Processing
4. With the authorization in place, you only need to enter the payment amount and you can leave it to your online payments processor to do the rest. If you have a recurring payments schedule set up, you can skip this step as well. If you’re not using a payments processor, your customers will be obliged to manually enter in the dollar amount and correct account numbers each time they want to make an electronic check payment.
5. Verification
6. This is where the payment request undergoes a verification process to ensure the account and bank routing numbers are accurate. This can either be handled automatically by your payments processor, or personally overseen by the payee or your customer. If everything checks out, the transaction is processed over the ACH system and the funds are transferred.
7. Fund Credit
8. The final step in the process is the funds showing up in your business bank account after a successful transaction. While this can normally take a few business days from the moment the transaction is initiated (this varies between providers), with the right payments partner, you can see next-day funding for your receivables.  Both you and your customer will receive confirmation once the electronic check payment is completed.

Every business needs a streamlined balance sheet, and therefore, reliable payment systems. EChecks are a much more secure way to transfer funds, given the in-built efficiencies. Seamless Chex, for example, uses 128-bit SSL encryption to ensure that no one other than the authorized parties can intercept the digital payment. It also allows for instant balance verification, eliminating the possibility of bounced checks, which can happen with eChecks, just as with paper checks if there are insufficient funds in the payer’s account.

Not only that, you save on expensive credit card fees with a flat pricing system. This is perfect for businesses with recurring or high-volume transactions. Try out Seamless Chex in a free 14-day trial to start saving money on your payments today. Sending an eCheck with Seamless Chex is incredibly easy.

If you happen to have more questions about how eChecks work or the benefits of electronic check payments for your business, don’t hesitate to contact us. We’re happy to help you.