eCheck Payment Processing: What It Is and How Long It Takes

In recent years, eCheck payment processing has grown in popularity. This method of making payments is convenient and fast. For merchants, it also offers lower fees and reduced chargeback risks.

However, these digital checks can also take a few days to process. The exact timeline depends on bank policies, which batch the payment was processed in, the presence of weekends, and other factors. 

So, what is an eCheck? And how long do eChecks take to process? To learn more, read on.

TL;DR

• eChecks are essentially a digital version of a paper check. Like paper checks, they are processed using the Automated Clearing House Network (ACH).
• While a number of factors can lengthen the processing speed, eChecks are typically processed in just three to five days.
• Batch timing, holidays, weekends, and bank policies can slow down the processing of eChecks. 
• By switching to eChecks, businesses can avoid administrative labor costs and bank runs. 
• When comparing eCheck vs. ACH payments, the main difference is that eChecks are a payment method and ACH is a network that processes payments.
• Thanks to strict ACH guidelines, this payment method is more secure than card payments and checks.
• However, eChecks face slower processing timelines and possible bank holds, so it’s important to be aware of the limitations involved.
• Often, eChecks are an effective option for businesses that frequently process large transactions or recurring payments.

PayCompass offers the heightened security, convenient platform, and fast setup that companies need to adopt eChecks.

What Is an eCheck?

An electronic check (eCheck) is the digital version of traditional paper checks. While traditional checks are signed with a pen, eChecks are digitally authorized by the customer. Once this is done, the funds can be removed from the customer’s bank account and transferred to the merchant’s bank.

Unlike credit card payments, eChecks are processed using the Automated Clearing House (ACH) network. This ensures the reliable transfer of funds, excellent security, and low fees.

While eChecks are slower than credit and debit cards, there are specific situations where eCheck payment processing is a better choice. This payment format is ideal for recurring payments, bills, tuition, and high-dollar purchases.

How Does eCheck Payment Processing Work? 

For an eCheck to be processed, it has to go through a series of steps with the payment processor, the ACH network, the customer’s bank, and the merchant’s bank. The process begins when the customer authorizes the payment, which can be done through a paper contract, over the phone, or through an online form.

Then, the business has to set up the payment. While different payment processing platforms vary, the merchant dashboard generally allows payments to be set up as one-time or recurring payments. Once this is done, the payment details are sent through the ACH network so that the business can get paid.

For the payment to be processed, the customer must provide a routing number, checking account number, and payment authorization. All of this information has to be verified by the bank or payment processor, which is why eChecks can take up to five days to process.

The eCheck Processing Workflow: A Basic Timeline

Before we answer the question, “How long do eChecks take to process?”, it first helps to understand the process they go through. From the moment a customer authorizes a transaction to the final settlement, there are several key steps that ensure the safety and authenticity of each eCheck transaction.

• The Customer Authorizes the Transaction: First, the customer authorizes the payment through an online portal, payment form, or signature.
• The Merchant Submits the Payment Information: The merchant gathers the bank account and routing numbers together before submitting the eCheck request to the payment processor.
• The Request Is Sent to the Automated Clearing House (ACH) Network: After the processor receives the request, they send it to the ACH network. In turn, the ACH network sends it to the customer’s bank for verification.
• The Bank Verifies the Request: Then, the bank has to validate the request and make sure adequate funds are available.
• The Funds Are Transferred: If the bank approves the request, the funds are transferred through the ACH network to the business’s bank.
• The Business Receives the Funds: Once the bank receives the payment, it is posted to the business’s account.

How Long Does It Take To Process an eCheck Payment?

If you submit the payment information today, how long will eChecks take to process? In most cases, eChecks can be completely processed in three to five days. 

This is slower than many other types of payments because of the additional authentication and security measures that the eCheck has to go through. While this delay may be inconvenient for the business, the added security is a major reason why eChecks have lower fraud and chargeback rates.

A few key factors determine how long eChecks take to process.

• Weekends and Holidays: The three-to-five-day timeline doesn’t count weekends or holidays, so non-business days can extend the processing timeline.
• Batch Timing: Unlike some transactions, eChecks aren’t processed individually. The timing of when the ACH batch is processed will determine when the individual payment is processed.
• Insufficient Funds: If the account has insufficient funds or other issues, it can delay the processing timeline.
• Bank Policies: Some banks have added security measures that can extend how long it takes. For example, an account hold may be placed on a new account or an unusually large transaction value.
• Amount: When large amounts are involved, the process may be slowed down so that extra verification can be performed.
• New Transaction: If the customer or merchant’s account is new, the bank may use added security measures to verify the authenticity of the account. Often, this increases the processing timeline by one to two days.

The Benefits of Using eCheck Payments

When you decide to accept eCheck payments, there are a few important benefits your business can enjoy. 

Convenient 

If a customer pays with an eCheck, you don’t have to send an employee out on a bank run to deposit it. Instead, you can instantly start processing the check from your office. On average, eChecks process around twice as fast as traditional checks.

For consumers and businesses, eChecks can save a lot of stress. Customers don’t have to wait in line for a money order, and they don’t have to worry about a physical check getting lost in the mail. Instead, customers can click a few buttons and instantly process their monthly bill payment. 

Meanwhile, the business can avoid unnecessary administrative work. Customers have an easier time paying digitally, and eChecks can’t get lost in the mail. As a result, you can also spend fewer labor hours chasing after late payments.

Secure 

When it comes to security, eChecks are one of the best payment methods to use. The ACH network is regulated by the Federal Reserve and is known for being extremely secure. Thanks to the clear digital record of payment, you can easily track and reconcile payments.

Unlike traditional checks, eChecks can’t be lost in the mail or stolen. Additionally, customers don’t have to worry about someone changing the amount of the check later on.

Cost-Effective

On average, credit card processing costs between 1.5% and 3.5% of the transaction total. While each provider is different, eChecks typically cost just 0.5% to 1% of the transaction total. Because eCheck payment processing occurs in batches, it is cheaper than wire transfers as well.

For businesses, there are other cost savings to consider. Because this payment method is exceptionally secure, fraudulent transactions are less likely. As a result, companies can spend less on chargebacks and disputed transactions.

Reversible

More importantly, eCheck payments can be reversed after they are initiated. In fact, stop payment requests can be sent up to the settlement date. For the customer, this increases the security and appeal of eChecks. 

The Limitations of eCheck Payments

If you’re thinking about accepting eCheck payments at your company, it’s important to be fully informed before you make your decision. The following are a few of the limitations of using eChecks that you should be aware of.

Slower Processing Times

One of the most important drawbacks of using eChecks is the processing times involved. When you run a credit card, payments typically take under 24 hours to process. With eChecks, this timeline extends to three to five days. 

This process can be even longer in specific circumstances. If the transaction triggers additional reviews or occurs near a holiday, you may have to wait for an extra few days.

Risk of Insufficient Funds

With a credit card transaction, real-time authorization protocols mean funds are verified at the time of the transaction. This same option isn’t possible with eChecks. The customer fund availability may take several days to confirm, so there is a risk that their account may have insufficient funds (NSF) for the transaction.

Because of this risk, it’s generally recommended to wait until settlement is finished to ship any products. Alternatively, some businesses require an alternative card to be on file or use pre-payment verification to avoid NSF issues.

Involvement of Significant Banking Information

Deciding to accept eCheck payments means that you have to store sensitive banking information and customer data to process the transactions. As a business owner, this means you’ll need to adopt added security measures to ensure the safety of your customers’ data and NACHA compliance. This type of banking data is considered more sensitive than credit data, so you’ll need strict data-handling policies and a payment processor that uses a high level of encryption. 

Some consumers may be hesitant to provide their sensitive information. This level of direct financial access can be dangerous if given to the wrong person, so some customers may prefer using a less sensitive payment method.

The Possibility of Account Holds

As a business owner, you can’t afford to have your cash flow interrupted in any way. With eCheck payment processing, there is a possibility of account holds. If the bank notices something unusual about a transaction or an account, it can place a hold while it investigates.

Unfortunately, holds can occur for many different reasons. New customer relationships and large, first-time payments are common sources of account holds. Additionally, any payment that doesn’t fit the account’s normal pattern can trigger a hold.

What Is the Difference Between eChecks vs. ACH?

While you may often hear them referred to at the same time, there is a clear distinction between an eCheck vs. ACH. ACH is a network where payments can be processed. You can think of it like a highway that allows payments to travel between senders and recipients.

An eCheck is like a car on that highway. While each eCheck is processed using the ACH network, it isn’t the only payment method that uses ACH.

Who Do eChecks Work Best For? 

If you are a business that uses recurring payments or high-volume billing cycles, eCheck payment processing is a good choice for your needs. Similarly, eChecks are great for companies that have large transactions. For example, medical offices, property managers, and utility providers often use eChecks as one of their payment options.

With eChecks, you get a safe, reliable method for collecting payments. Companies that prioritize security over instantaneous speed often opt for eChecks. In particular, compliance-heavy industries, like healthcare, finance, and nonprofit organizations, benefit from this payment method.

How PayCompass Supports Fast, Secure eCheck and ACH Payment Options

By working with PayCompass, you can enjoy fast, secure eCheck and ACH payment options. With eChecks and ACH, your business can access lower transaction costs and reliable bank-to-bank payments.

State-of-the-art security is built into every aspect of PayCompass’s platform. Our processes are in strict compliance with NACHA guidelines. From the latest encryption processes to fraud monitoring, we offer the best tools for preventing fraudulent transactions, avoiding chargebacks, and ensuring a consistent cash flow.

Besides taking advantage of a lower-cost payment option, eChecks can make it easier to handle recurring payments and subscriptions. With PayCompass’s platform, you can easily set up payments, protect customer data, and access advanced analytics reporting.

Final Thoughts

In recent years, eCheck payment processing has grown increasingly popular among consumers and merchants. It offers a secure, low-cost payment processing option. From recurring payments to large transactions, there are many useful applications of this payment method. 

While there are many benefits connected to accepting eCheck payments, there are also some major limitations as well. With typical eCheck transactions taking three to five days to complete, this payment option isn’t ideal if your company needs a cash infusion quickly. Avoiding NSF risks and protecting customer data are also key for companies that want to use eChecks.

By understanding the benefits and limitations in advance, you can be proactive about creating policies and security measures. With the right approach, you can avoid unnecessary delays and ensure customer trust.

If you’re ready to incorporate eChecks into your company’s processes, our team of payment processing experts can help. Contact PayCompass today to learn more.