What is an Electronic Check Payment?

Electronic check payment should be among the many products and services offered by a reputable merchant services provider. After all, some shoppers prefer paying by check over using a credit card. In today’s competitive market, businesses need to cater to their customers’ payment preferences and should be prepared to accept electronic check payments.

The electronic check is an innovation that came about in response to the development of electronic commerce, or e-commerce. An e-check acts like a conventional paper check but is processed via the Internet.

In its electronic form, a check can be processed in fewer steps and has more security features than a paper check, including authentication, digital signatures and encryption. E-checks are governed by the same regulations that apply to paper checks, and they can be used to pay for any transaction that a paper check can cover.

An electronic check conversion gathers information from a paper check (ABA routing number and bank account number) and converts it into an electronic payment directly from the customer’s bank account. It starts when a customer gives the information to the merchant. In a retail point-of-sale transaction, the check is run through an electronic system that captures the data and the check amount. The check is then returned to the customer. In a mail order or online transaction, the customer includes the check with their order form or enters the information on the website payment page. Once the merchant has the pertinent information, they submit the e-check transaction. In all cases, the data is encrypted for secure electronic transmission to the processor.

The processor receives the information, credits the merchant’s account for the transaction total and requests a debit to the customer’s checking account through the Automated Clearing House (ACH). Unlike credit card processing, an e-check conversion is not completed in real time because it requires intervention by the customer’s bank.

The customer’s checking account is typically debited within one or two business days. If there are adequate funds available, they are forwarded back through ACH to the processor; if there are insufficient funds to cover the purchase, or some other problem arises, the merchant is notified and their account is debited. This is the same scenario as a “bounced” paper check.

With many chain stores now accepting electronic check payments, it’s only a matter of time until customers will expect the service wherever they shop. Talk to Merchant Express today about how to prepare your business for this inevitability.