First Data’s white paper, “Electronic Checks: The Low-Risk, Low-Cost Way To Accept Online Payments”, highlighted what drives customers to make their buying decisions. Payment options factored greatly in most customers’ decisions as to “where” they shop online.
For most consumers, a shopping experience may end unfavorably if they are not able to find their most preferred method of payment during the checkout process. An extensive amount of research has proven that when merchants provide customers with an ample amount of payment options, their sales online tend to increase.
Although the predominant and most popular methods of payment consumers use are debit and credit cards, the percentage of those using cards is dropping. Many are simply choosing not to use credit cards as a form of payment. In answer to this, merchants are now beginning to accept alternative forms of payment, such as e-Checks.
What Are E-Checks?
E-Checks are also known as online checks, electronic checks, internet checks, or direct debit. The way it works is that a customer is able to pay with the money in their checking account. There is no need to use a paper check or a credit card. All the customer needs to do is submit the checking account number and bank routing number.
The funds are then transferred by sending the transaction via the Automated Clearing House (ACH), which is an electronic banking network that is used for making direct deposits as well as electronic bill payments.
What Are The Benefits For Merchants?
Merchants are able to enjoy many benefits when they choose to accept e-Checks for their business:
- Boost in sales: Online customers shop where their preferred method of payment is used. If there is a limit in payment options or worse, they don’t have their favorite option, they will likely abandon their cart.
- Funds are processed faster: e-Checks are processed quicker than traditional checks. This greatly simplifies accounting and the process of reconciliation.
- Lower costs for processing: The processing fees for e-Checks are considerably lower than card-not-present (CNP) interchange fees. Unlike credit card transactions, e-Checks offer a dramatic amount of savings in processing fees.
- Limited risk: Upon entering their checking account information, it is screened against a database of bad checks and other “risk assessment parameters”. Here, the transaction can be approved or denied instantly.
The Impact E-checks Have On Revenue And Costs
The potential for amassing revenue is significant. While seventy-seven percent of consumers have debit cards and 72 percent have credit cards, almost 92 percent of consumers have a checking account. This means that a considerable portion of the population would benefit greatly from using e-Checks.
E-Checks give customers an alternative payment method that is just as quick and convenient as credit and debit cards.
The transaction processing fees for e-Checks are considerably lower than credit card processing expenses. Some of the typical credit card fees include interchange fees, charge-offs, and fraud prevention services.
According to market research, online merchants can anticipate 3 to 8 percent of their sales to be paid for by e-Checks. Half of this amount consists of sales that would have been lost.
For the percentage of existing sales that are converted from bank card payments to e-Check payments, the merchant would save money on processing fees. This all depends on the average interchange rate as well as the terms of its e-Check acceptance service agreement.
Of all the ways that merchants try to retain and attract new customers, adding new payment methods to their repertoire seems to always be neglected as a key strategy for their e-Commerce business.
E-Checks are safe, easy, and more cost-effective than credit card processing. Merchants receive their funds quickly and it’s a great way to increase sales and their customer base. What’s not to like?