What is Electronic Check Payment Processing?

While an electronic check might sound more like an 80’s rock band than a form of payment, there’s a lot to learn here. Chances are you’re familiar with the traditional check payment method, a staple dating back several hundreds of years. Traditionally, checks were deposited to the user’s bank and then processed manually. The recipients then had to wait days for the funds to be cleared and processed into their accounts. Luckily, technology has greatly improved since those days. Now, electronic checks allow these payments to be made from a person’s checking account electronically. There are many benefits for both parties when using the eCheck payment method.

But what is an electronic check?

What Is an Electronic Check?

An electronic payment that’s made from your checking account is called an electronic check, or eCheck. Think of an electronic check as a virtual version of your paper check. When a customer uses an eCheck as their form of payment, the funds are transferred to the merchant’s bank account using the Automated Clearing House (ACH) network.

man overseeing an eCheck payment on his computer

Merchants must have eCheck processing to enable these types of transactions to be made.

How Does Electronic Check Processing Work?

Electronic check processing is a faster way to process payments than the traditional paper check method. The process is otherwise similar to how paper checks are handled. Switching to electronic check processing, allows businesses to process digital payments, saving time, and reducing paper waste. The main steps involved in processing an electronic check are explained below.

The Transaction Is Authorized

The first step to processing an eCheck transaction is that the business must obtain the customer’s authorization to take the funds from their account. This authorization can happen through the customer filling out a credit card authorization form, phone conversation, or a signed order form. Once authorization has been completed, the check information can be passed to the payment processor.

The Payment Goes Through

The business can enter the payment information once the payment has been authorized by the customer. This includes the customer’s bank routing number. The online payment processing software is where this information is entered. Recurring payment information will also be included here if this payment has a recurring schedule. After the information has been entered into the software, the business will submit it to start the ACH payment process.

Funds Appear

The amount of the payment is withdrawn automatically from the customer’s bank account. A receipt for the payment is gendered by the software to the customer. Funds are deposited into the business’s bank account. This usually occurs within three to five business days after initiating the ACH transaction. This also marks the end of the electronic check process.

What Types of Payments Can You Make with eChecks?

The most commonly used payment method in the United States is credit cards. But eChecks are also a popular method of payment. The fees that merchants are charged to process eCheck payments are lower than what is charged for processing credit cards. eCommerce and subscription or recurring revenue business models are the most most common places to find eCheck payment options.


It is common to have eCheck as an accepted form of payment for an eCommerce website. Because eChecks allow merchants to process digital payments, there are customers who may prefer it over using a debit or credit card.

If a customer doesn’t have the sufficient funds to process a payment, the transaction simply won’t go through. You do not risk having to pay a return check fee. It’s a safer way to accept international transactions. There’s also no limit to the monetary amount that an eCheck can be for. If you run online stores that sell high-priced products, you can accept this method of payment more efficiently.

Subscription/Recurring Revenue

If your business is has a subscription-based or recurring revenue model, eChecks make an ideal form of payment.  Other names that this method of payment is known as in these models are “recurring ACH payments.” It is common for property managers to request that tenants fill out a recurring eCheck rent payment form. This enables them to deduct rent automatically on a specific day each month from the tenant’s checking account.

Other common places that electronic checks work for recurring payments include the following.

  • Gym memberships
  • Mortgage payments
  • Credit card payments
  • Auto loan payments

Do ACH and EFT Fall Under Electronic Check Processing?

man on laptop processing an electronic check

The answer is yes, in essence. Both ACH and EFT payments are types of electronic payments. Electronic Funds Transfer, or EFT, is the process of moving funds from one bank to another electronically without involving bank employees. The transfer can be completed online without the need for paper money.

EFT is a broad term that’s used to include many types of electronic payments including wire transfers and ACH transfers. Because transactions occur completely online, EFTs are also sometimes called ePayments. It would be more accurate to say that electronic check processing falls under EFT.

ACH payments, which are also known as electronic checks or eChecks, are a form of EFT payment. This method moves funds between accounts electronically without the need for stamps, envelopes, and checkbooks. The main difference is how ACH payments use a batch processing method. Transactions are usually handled one at a time with checks or wire transfers.

Are Electronic Checks Secure?

One of the key benefits of electronic checks is that they are a secure payment method. Data and security breaches are unfortunately a common occurrence in today’s world. However, electronic checks provide more security than using a physical check. This is because the use of eChecks eliminates the physical document from the transaction. There’s nothing that can be lost or stolen which can be used to commit fraud or identity theft.

The additional layers of authentication through the payment process adds layers of security that protect both parties. The encrypted data provides a secure online payment that you can feel confident in.

How to Get a Merchant Account for Electronic Check Payment Processing

In order to process electronic check payments, you will need a merchant account. This process is simple and identical to acquiring payment processing for credit card payments. However, if your business is considered a high risk it is important to find a merchant provider who is experienced in your industry. When approved, your merchant services provider will walk you through setting up eCheck payments for your business. And that’s it!

Securing electronic check payment processing for your business is a great way to provide alternative payment methods as well as security and high-ticket transactions. With the right processor, you’ll be processing eChecks in no time.

PaymentCloud Author Allison Eilhardt

Allison Eilhardt

Allison is a writer based in Los Angeles, CA. She has been writing professionally for over five years, covering topics ranging from charities and social events to intricate finance spotlights. Allison is currently the Director of Content at PaymentCloud, a merchant services provider that offers hard-to-place solutions for business owners across the nation.