An eCheck is basically just a digital paper check. Importantly, a cheaper, faster, easier, and more reliable version of a paper check. Echecks are processed over the Automated Clearing House (ACH), which is a major U.S. network for processing transactions. The ACH is run by a nonprofit called Nacha, formerly the National Automated Clearing House Association (NACHA), now merged with the Interactive Financial eXchange (IFX) Forum.
Echeck verification is quick and hassle-free. Most eChecks sent through ACH take between two to four days to clear the network. This is a massive improvement over paper checks that need to be delivered through post, then manually deposited and processed. It’s a secure way to route the payment since an eCheck can’t get lost in the mail. With eChecks, you don’t have to pay for paper checkbooks either, which aren’t all that cheap anymore.
However, the biggest plus with an eCheck is just how convenient they are to use, especially if you’re a business that needs to send and receive recurring payments. If you’ve ever wondered how eChecks do work and what the eCheck verification and transfer processes are like, here’s a detailed step-by-step:
Step 1: Obtaining Authorization
The payer needs to have given permission for the payee to charge them the amount. This is usually done by way of a signed contract or filling out an online form. If the eCheck is being processed through a payments processor, this is normally a one-off occurrence.
Step 2: Information Entry
Once authorized, the payee enters the necessary information into the interface. This includes either the checking account number and bank routing number, or the user can enter their online bank login. Again, with an online payments solution, all of these only need to be entered once and a recurring payments schedule is easily set up. With this, the eCheck verification stage begins.
Step 3: Verifying Account Details
For the eCheck to successfully clear, the account number and routing details entered into the form need to match those the payer originally provided at the authorization stage. This helps determine if the account is open and active. This happens automatically with an online payment processor. Without one, you’d have to do it manually.
Step 4: Verifying Bank Balance
An eCheck can bounce just like a paper check. The system needs to verify that there are sufficient funds in the payee’s account for the transaction. This step can usually take between 24 to 48 hours with most banks. However, with Seamless Chex, it happens instantly, saving businesses a significant amount of time. Once eCheck verification is successful, the transaction enters the ACH system.
Step 5: ACH Processing
Once a transaction enters the ACH network, the fund transfer process begins. The money is withdrawn from the payer’s account and deposited into that of the receiver. This can take another three to four days.
Step 6: Payment Reflection
Once the transfer completes, the deposit is reflected in the payee’s account. Both parties also receive a confirmation by text and email.
All in all, the eCheck verification and transfer process can take as long as five days or happen as quickly as the next day, with the right payments partner.
If you have more questions about how eChecks work, do the smart thing and drop us a query. We’ll get back to you promptly!