If you’re an experienced business owner, your customers may have used electronic checks to make payments. Since many merchants find this system difficult to understand, they let their payment processors handle the technical aspects of the system. In case of disputes, the merchant cannot do anything except accept the demands of the payment process. Therefore, it is important that you understand how these electronic payment systems work. Keep reading to know more.
If you run a business, you may want to have at least a basic understanding of how electronic check processing works.
Let’s start with the definition of electronic check. Basically, this is a type of payment system where funds are withdrawn from a customer’s bank account and deposited directly into the merchant’s account. The network that takes care of everything behind the scenes is called the Automated Clearing House. To process these payments, business owners must have electronic check processing. This system allows easy withdrawal of payments from the bank account of the customer or client.
Get an eCheck merchant account
If you already accept credit card payments, your merchant account may be ready to install ACH processing in the system. Many companies offer these services for online businesses. Therefore, you can choose from many options depending on your business requirements and personal preferences.
As soon as you have found a processing account that can meet your requirements, you need to complete the form. You must provide many details, such as processing volumes and the number of years you have spent running your business. Generally, the application process is quite easy and quick. In addition, the approval process is completed in a few days.
How electronic check processing works
There are many similarities between paper check handling and electronic check processing. The difference is that electronic checks are processed much faster. Below is the description of the whole process. For a better understanding, we have divided the process into three steps:
1. Purchase Authorization
For purchase approval, customers can complete an online form or have a phone conversation. After authorization, the check information is sent to the payment processor.
2. Payment is finished
After receiving the check information, the payment processor draws the funds from the customer’s bank account and provides a journal entry.
3. Funds are deposited into the merchant’s bank account
After the start of the transaction, the electronic check requires up to 3 days to clear and transfer the funds to the merchant’s account.
Recurring payments
One of the most common ways to make payments online is through credit cards. However, when it comes to recurring transactions, electronic checks provide the best solution. This is why ACH billing is gaining popularity among real estate managers. The reason is that they can easily collect the monthly rent.
In summary, this was a brief overview of how electronic check processing occurs. If you are a business owner, you may want to try this payment method to make it easy for your customers. This can help make your business more attractive to consumers and customers.