What Is E-Check Processing?

While traditional checks will never disappear entirely, they are being replaced by digital alternatives that are more efficient, more convenient, and more secure.

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If your business hasn’t already hopped on the digital bandwagon or has yet to start accepting check payments online, it’s time. However, it’s essential first to understand how e-check processing works. 

What to Know About E-Check Processing

E-checks are processed through the Automated Clearing House (ACH) network. This is a central and established payment infrastructure used by U.S. financial institutions. You can imagine ACH as a figurative highway that moves electronic money; e-checks are one type of vehicle traveling on that highway. 

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E-check processing happens much more quickly than traditional paper check processing because traditional checks require additional logistic overhead for a payment to be completed. With conventional checks, the recipient’s bank must first verify the check and then send it to the sender’s bank for further confirmation, which can take some time to complete. 

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Although e-check processing is faster, it relies on the same information. The person generating an e-check must provide their name, email address, account number, and bank routing number and authorize the payment. 

How E-Check Payment Processing Works

Here is a step-by-step look at how a typical e-check payment is processed:

_{1. Customer Authorizes a Transaction}

If a customer wants to use e-checks to pay for goods or services, they must first authorize an electronic money transfer from their bank account to the merchant’s bank account. Merchants can get the authorization in a few different ways, including an order form, recorded voice message, signed contract, authorization form, etc. 

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Simply put, the first step involves the merchant receiving confirmation that the customer is willing to use an e-check to pay for the goods or services they want. 

_{2. Merchant Receives Payment Details}

Once the merchant has received authorization, they must acquire the information needed to execute the payment. This includes the customer’s bank account number, routing number, and name. If there will be recurring payments, the merchant will need the details about the payment schedule. 

3. Payment Processor Verifies Credentials

Next, the transaction must be validated with the merchant’s payment processor (such as Seamless Chex). 

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The payment processor will confirm that the transaction looks legitimate. They will verify that the customer matches the account name they’re paying from and has enough money to cover the payment. Once the payment is verified, the transaction will be executed. 

4. Funds Are Transferred to the Merchant’s Account

Finally, the e-check funds will move through the ACH network from the customer’s account to your business account. 

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The ACH network processes payments in batches, so this is not an instantaneous credit. It will generally take two to three business days for funds to appear in the business account.

How E-Check Processing Differs From Credit Cards

E-checks and credit card payments are both digital payment mechanisms. The fundamental difference between the two is how these payments are processed. 

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While e-checks move through the ACH network, credit card companies maintain their own payment-processing infrastructure. These are private networks used to capture specific card transactions, so they typically incur higher fees. 

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Meanwhile, because e-checks don’t use a private processing system, the fees are significantly lower with an ACH payment. They do not incur any credit card interchange fees and can cost as little as ten cents per transaction. For businesses that process hundreds of thousands of online transactions each year, this can translate into major savings.

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Another difference is that while a customer doesn’t need funds on hand to use a credit card, they must have enough funds in the account when paying with an e-check. 

Final Thoughts

Anyone can use e-checks to make a payment to your business, as long as you are enrolled in an e-check-processing service through your bank or another e-check payment-processing platform. 

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With over 99% approval rates, next-day deposits, and minimal transaction fees, Seamless Chex is a full-service e-check payment processing platform for all your billing needs. Sign up today to start accepting e-check payments online and expand your payment methods.

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Looking for more information on e-check processing? Don’t miss our posts on the documents you need for e-check processing and what happens when an e-check bounces!

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