What is an E-check? Understanding How it Works
With the evolution of technology in the finance sector, many digital payment methods have been applied, e-check is one of the convenient ways and is chosen by many customers.
One of the main advantages of using e-checks is the convenience they offer. Consumers can make payments anytime and anywhere with an internet connection. That is the huge benefit of information technology application in the finance sector.
So, what is an e-check and how does it work? VNEXT Global will help you to understand quickly in this article!
1. What is an E-Check?
An e-check (electronic check) is a form of electronic payment that uses the information from your checking account to transfer funds to the payee. It is an electronic version of a paper check, which includes the date, payee name, payment amount, and signature. An electronic check is actually an electronic message used to transfer an amount of money from the buyer's account to the seller's account for the payment of a certain transaction.
It is similar to a paper check but faster and more secure. You can use an e-check to pay for online purchases, bills, taxes, and other transactions that accept this method of payment.
2. Benefits of e-check to the payee
Some of the benefits of using an e-check are:
• Cost-saving: It is cheaper than a paper check, as you don't have to pay for printing, mailing, or processing fees.
• Speedy: It is faster than a paper check, as you don't have to wait for the mail delivery or the check clearing process.
• Information safety: It is more secure than a paper check, as it has various security features such as encryption, authentication, digital signatures, and fraud detection.
• Digitalized: It is more convenient than a paper check, as you can make payments anytime and anywhere with an internet connection.
• Friendly to the environment: Compared to a paper check, it reduces a large amount of paper waste and carbon emissions. Any enterprise that is in pursuit of ESG standards will be well- aware of this important factor.
3. Payment mechanism of e-check
E-checks use the Automated Clearing House (ACH) network to proceed payment process. ACH is a system that helps to connect banks and other financial institutions. To activate an e-check, customers need to provide their bank's routing number, their checking account number, and their name as it appears on the account.
The e-check process consists of four steps:
• Step 1: Customers verify a predetermined amount to be withdrawn from their accounts.
• Step 2: That predetermined amount will be transferred electronically through the ACH network.
• Step 3: The amount is transferred from the customer’s financial institution to the seller’s one.
• Step 4: The money is withdrawn from the customer’s bank account and deposited into the payee’s bank account.
4. Suitable types of payments
E-checks are suitable for anyone who wants to make payments electronically, without using a credit card or a debit card. However, some types of businesses and customers may benefit more from using e-checks than others. For example:
• Subscription-based businesses
E-checks make recurring payments, automatically pay, and auto-renewal. That’s why the payment process turns out to be easy and convenient for businesses and their customers. For example, filming, music, course memberships, and magazine subscriptions are now applied popularly.
• Online businesses
E-checks allow online businesses to sell their products or services once and continue to collect monthly payments from their customers. For example, software, coaching courses.
• Businesses that accept a large payment
E-checks have lower fees than credit cards or debit cards, which can save money for businesses that process large amounts of money. Some payment types could be rent, utilities, tuition, etc.
• International payments
E-checks can be used to send or receive money across borders, as long as the payee has a bank account that accepts e-checks.
5. Secured enough?
E-checks are secured because they use various security features to protect your information and prevent fraud.
This is the process by which the payment banks verify whether the individual submitting the account information that he or she is authentical or not. Authentication ensures that fraudulent payment information is not submitted to the merchant.
This is the process whereby the data is converted into a code that can only be read by authorized parties. Encryption protects your information from being intercepted or altered by hackers or other malicious actors.
• Digital signatures
This is a form of electronic signature that uses cryptography to verify the identity and integrity of the sender and the message. Digital signatures ensure that the payment information has not been tampered with or forged.
• Fraud detection
This is the process whereby the payments provider monitors and analyzes the transactions for any suspicious or unusual activity. Fraud detection helps to identify and prevent potential fraud attempts before they cause any damage.
E-checks are considered more secure than paper checks as they reduce the risk of human error, theft, loss, or duplication. They also have lower processing fees and faster clearing times than paper checks. E-checks are a safe and convenient way to make online payments, as long as you use a reputable and reliable payment provider.
If you are looking for a trusted provider for e-check development solutions, VNEXT Global is the ideal choice. With 14+ years of experience, we certainly can help you to optimize your business digitalization within a small budget and a short time. With a customer-centric approach, we provide effective and transparent communication, timely and reliable support. Currently, we have 400+ IT consultants and developers in Finance, Healthcare, Mobile App, Web App, System Development, Blockchain Development and Testing Services. We have provided solutions to 600+ projects in several industries for clients worldwide. We are willing to become a companion on your way to success.
Please feel free to drop us an email when it is convenient for you to have an online meeting to discuss this further. Have a productive day!