Electronic payments are gaining ground, according to a study conducted by the Federal Reserve. In their latest payments study, the Fed found that a total of 16 billion checks were written in 2018, with a total value of $26.2 trillion. This was a significant drop from 20.2 billion and $29.68 trillion back in 2015.
Another significant sign of the advancement of electronic payment methods was seen in the higher use of debit and credit cards, with payments that have increased at an annual rate of 8.9% from 2015 to 2018.
Today’s payment space looks dramatically different from just a few years ago. New options for payment include contactless payments, digital wallets, electronic payments, EMV chip technology, and cryptocurrencies. Checks seem outdated compared to the latest, digital payment methods.
What Are eChecks?
Another electronic form of payment that is quickly gaining ground is the eCheck. An eCheck, also known as an electronic check, an online check, internet check, and a direct debit, is a digital version of a paper check.
It works the same way as a paper check in that it uses the same information that you would find on a paper check, such as the bank’s routing number and account number in order to send funds.
How Does It Work?
To accept an eCheck payment, a business must first get the customer’s information such as their bank check account and routing number. This information can be obtained by phone, online, or in-person through a paper form. Many businesses offer a secure form page for customers to fill out on their website.
With this information, the merchant’s bank can communicate directly with the customer’s bank. When the funds are verified, the direct debit takes place through the ACH network.
The Advantages Of Using eChecks
There are many perks to using eChecks for your business. Besides providing an additional payment method to widen your customer base, it’s a great alternative for those customers who simply choose not to use credit cards. Here are more benefits to incorporating eChecks into your business:
1. They are more secure
eChecks are far more secure than paper checks. This is due to the five major security components for all eCheck transactions. They include:
- Authentication – Here, the payments provider verifies the individual submitting the account information. This ensures fraudulent payment information is not submitted to the merchant.
- Encryption – This process “masks” sensitive data, making it “non-sensitive” and useless if stolen. This is required for all ACH transactions since they get processed over unsecured electronic networks.
- Public key cryptography – As part of the encryption process, it is used in ciphering the data, protecting it in transit.
- Digital signature – This encryption process ensures that the eCheck transaction cannot be fraudulently duplicated.
- Certificate authorities – They issue Digital Certificates such as SSL in order to protect the information, enable secure communication, and encrypt transactions.
- Duplicate detection – As a fraud detection strategy, it monitors for suspicious activity and duplicate eCheck transactions.
2. Less processing time
eChecks take a lot less time to process than checks. For paper checks, it takes a considerable amount of time and manual effort to deposit a paper check at the bank.
Paper checks also require longer processing and hold times than eChecks. None of these are issues for eChecks as everything occurs digitally, dramatically speeding up the process.
3. More Affordable
Compared to other payment methods, processing fees are more affordable. Credit cards can range between 1.5% to 3.5% for every transaction. eChecks can reduce payment processing costs by up to 60%.
A Great Addition To Your Payment Methods
With the many benefits of using eChecks, it is no wonder so many businesses are adopting them as another viable payment method. With high levels of security, convenience, and affordability, accepting eChecks just makes sense.