What Are eChecks and How Do eCheck Payments Work? (2024) - Shopify UK (2024)

An eCheck is a type of electronic payment where money is transferred from the payer’s bank account to yours via the Automated Clearing House (ACH) network.

According to Nacha, the organization that oversees ACH transactions, merchants processed 31.5 billion eCheck payments in 2023, with a combined value of $80 trillion.

For business owners, accepting eCheck payments opens the door to this trillion-dollar market. Considering 11% of people have abandoned their online shopping carts due to insufficient payment options, not offering eChecks could mean missing out on sales.

This guide covers everything you need to know about eChecks, helping you decide whether to accept them in your online store.

What is an eCheck?

An eCheck, or electronic check, is a form of digital payment where merchants and consumers transfer funds between bank accounts through the ACH network.

Like a paper check, an eCheck requires customers to provide required information—like their checking account number, routing number, and payment authorization. However, customers submit these details online via an eCheck authorization form instead of writing out a physical check. This allows your ACH payment to be processed electronically through an ecommerce payment gateway.​

How are eChecks processed?

Banks process eChecks through the Automated Clearing House (ACH) network, a central digital payment processing infrastructure for US financial institutions. Think of the ACH as an electronic highway that facilitates the rapid movement of funds.

eChecks process faster than traditional paper checks, as they bypass the logistical steps of physical verification by banks, speeding up transactions. Despite this speed, eChecks still require the same essential information such as routing and bank account numbers, email addresses, and authorization to initiate a payment.

Here are the steps to processing an eCheck:

1. The customer authorizes a transaction

To initiate an eCheck payment, a customer authorizes the digital transfer of funds from their bank account to the merchant’s bank. This authorization can come via a signed contract, an authorization form, or an online order confirmation. For recurring payments, this authorization allows future transactions without repeated approvals.

2. The merchant captures the necessary payment details

Once authorized, the merchant collects essential payment details from the customer, such as the bank account number, routing number, and any other pertinent details. In the case of large or recurring payments, the merchant collects all the details in accordance with the payment schedule.

3. The payment processor verifies the credentials

Before processing the transaction, the payment processor conducts several checks to ensure its legitimacy. These checks include verifying the match between the customer and account names and ensuring sufficient funds are in the account to cover the payment.

Merchants using point-of-sale software can automatically capture any information a customer enters online or through an app and send it to the merchant’s virtual eCheck terminal. This saves the hassle of entering those details twice. If you have this type of integration, your eCheck payment processor can instantly verify the credentials and begin processing as soon as the customer authorizes the transaction.

4. The funds appear in the merchant’s account

After verification, the funds are transferred through the ACH network. The network processes transactions in batches several times a day, accelerating the transfer compared to traditional checks requiring physical handling and transport. While this electronic process is faster, it typically takes two to three business days for the funds to be available in the merchant’s account.

How safe are eChecks?

eChecks are more secure than paper checks and offer additional consumer protections to guard against fraud. Five main security measures make eChecks a robust and reliable payment technology:

1. Authentication: This initial step ensures the customer consents to the transaction by verifying the account information of the person making the payment.
2. Digital signature: A timestamped digital signature enhances security and helps prevent fraud.
3. Duplicate detection: This measure prevents fraud by identifying duplicate eCheck transactions or other suspicious activities.
4. Encryption: Sensitive data is encrypted to ensure safe transmission through digital networks. Even if intercepted, this data remains inaccessible without the private keys needed to decrypt it. Every transaction on the ACH network, including eChecks, is encrypted.
5. Certificate authorities: These entities store, sign, and issue digital certificates, such as the widely used SSL certificate, to certify the ownership of public keys used in data encryption.

The advantages of using eChecks

eChecks are fast

Paper checks can take more than a week to clear as banks confirm details with the originating bank—a time-consuming process. In contrast, eChecks are a digital upgrade of the traditional paper check. They typically clear in two to three business days, reducing processing time and administrative costs, while ensuring businesses receive their money sooner.

You can’t lose or misplace an eCheck

It’s easy to lose or misplace a paper check, and if lost, your only recourse is to request a replacement, risking potential fraud if the customer doesn’t cancel the original check. eChecks, being intangible and digitally tracked by sophisticated computer networks, eliminate the risk of loss or misplacement.

eChecks are highly secure

eChecks streamline the traditional verification and authentication process required for paper checks, making customer payments more straightforward and quicker. Like paper checks, eChecks use rigorous security measures employed by banks for other transactions, ensuring payments are safe and secure.

eChecks don’t waste materials

Traditional checks require physical paper, contributing to waste, especially when they are shredded post-transaction. eChecks are electronic, eliminating a paper trail and the need for physical transport. This not only reduces your business’s reliance on paper, but also decreases your carbon footprint, supporting more sustainable business practices.

Should you accept eCheck payments?

With decades of innovation in the financial industry, eCheck payments have become increasingly common as traditional check usage continues to decline. Although paper checks may never disappear entirely, understanding and adopting eCheck payments is crucial for any online business owner or entrepreneur aiming to grow their business.