eChecks vs Automated Clearing House (ACH)

The terms “eCheck” and “ACH” are often used interchangeably. So, is there a difference?

The term “e-check” or “eCheck” stands for “electronic check,” while “ACH” stands for the Automated Clearing House. So, an e-check is any check that’s processed electronically rather than using a paper check, and an ACH payment is any payment that’s process through the Automated Clearing House.

The Automated Clearing House is the main system that various financial institutions use for electronic funds transfers. This means that electronic checks are typically processed through the Automated Clearing House.

In other words, “eCheck” and “ACH” refer to slightly different things since the former is about the payment and the latter is about the way it’s processed. However, they generally end up referring to the same type of payment.

Why Use eCheck Payments?

ACH and eCheck payments are incredibly popular, and for good reason.

According to the 2022 Federal Reserve Payments Study, approximately 36.2 billion ACH transactions occurred in 2021, with a total value of $91.85 billion. The study also found that ACH transactions have been increasing. Between 2018 and 2021, the number of ACH transactions increased by 7.7 billion, and the increase in ACH transfers accounted for more than 90% of the increase in noncash payment value.

So why do people like electronic ACH payments so much? There are lots of reasons, but five stand out as particularly important.

1. ACH Payments Can Be Fast

When you think of checks, you probably don’t think of speed. That’s because paper checks can be notoriously slow, especially if you have to wait for the check to arrive in the mail.

ACH payments can be much faster. Although payments can take up to three days, next-day and same-day ACH payments are possible. Just eliminating the time for mail delivery can shave off days from the normal paper check process.

Slow payment processes aren’t just annoying; they’re bad for your cash flow. If you want to use a check but speed is important, ACH electronic checks are a fantastic option.

2. ACH Payments Are Convenient

Writing a paper check isn’t that hard. However, actually getting it to the recipient is another matter. Assuming the recipient isn’t local, you have to send the check in the mail, and that requires an envelope and stamp. Then you have to wait for it to arrive, a process that can take days even if nothing goes wrong. Wire transfers can also be a pain if you have to go to a financial institution to initiate the transfer.

Compared to writing a paper check or arranging for a wire transfer, ACH payments are very convenient. Electronic checks can also be more convenient for the recipient since there’s no need to drive to the bank to make a deposit. Many consumers expect the convenience of online payments, and electronic check payments are one viable option.

3. ACH Payments Are Secure

This payment option is generally considered relatively secure, and that can’t be said of all payment methods. Scammers have been known to steal mail so they can find checks and doctor them, making it possible for them to drain bank accounts. In fact, the U.S. Department of the Treasury says check fraud increased by 385% since the start of the COVID-19 pandemic.

With mail theft and check fraud on the rise, sending a check through the mail can be a frightening prospect. For people who are worried about mail theft and paper check fraud, electronic checks can be a far better option.

4. ACH Payments Don’t Require Physical Contact

The Federal Reserve data shows that ACH payments surged between 2018 and 2021. It may not be a coincidence that this period overlaps with the COVID-19 pandemic.

According to Nacha, the body that governs the ACH network, ACH payments increased by 8.2% between 2019 and 2020, and the value of payments increased by 10.8%. During the pandemic, people needed contactless ways to send money, and ACH payments were a logical option.

Even outside of global pandemic, the lack of physical contact makes electronic checks a good option for many people who are sick or dealing with mobility issues.

5. ACH Payments Don’t Require a Credit or Debit Card

Although many people have these payment methods, not everyone does, and not everyone likes to use them. Credit cards in particular can lead to consumer debt and rack up fees, so some consumers may want to steer clear.

The reality is that no single payment option is going to appeal to everyone. Some people want electronic checks. Some people want credit cards. The more options you can offer, the more people you’ll appeal to, and that should definitely include ACH payments.

eCheck Payment Processing

We’ve made the case for ACH electronic checks. Now that you’re convinced, you might be wondering how you can start accepting these convenient electronic payments.

There are a couple of different ways that businesses can accept ACH transfers, but one of the easiest ways is to use a payment service provider that supports ACH payments. The payment service provider can provide the payment gateway and manage the payments so you can focus on running your business.  

Choosing an eCheck Payment Processor

Using a payment service provider is the easiest way to accept electronic checks, but not all payment service providers are the same. Before selecting your eCheck payment processing partner, consider the following issues:

Is the payment service provider secure?

ACH payments can be safe, but to avoid problems, it’s important to choose a payment service provider with strong security measures in place. PCI compliance and customer vault tokenization are two key things to look for.

Does the payment service provider support other payment channels?

ACH electronic payments offer a lot of advantages and are a popular choice, but they’re not the only good payment option available. A payment service provider that offers more payment options, such as credit cards, CashPay and QR codes.

Does the payment service provider provide easy payment tracking and reporting features?

The more information you have, the easier it is for you to stay on top of potential problems and make wise decisions. Your payment service provider should put the information you need at your fingertips.

Does the payment service provider support recurring payments?

For payments that are due every month or on another recurring basis, recurring payments are convenient for consumers. This option also helps companies improve cash flow by avoiding missed or late payments.

What else can the payment service provider do for you?

When you select a payment service provider, you’re choosing a partner for your business. That partner should do as much for you as possible. For example, does the payment service provider help you manage chargebacks? Does it provide branded options so you can maintain a consistent user experience?

How much does the payment service provider cost?

A pricey payment service provider can increase your overhead costs and cut into your revenue, so cost is an important factor.

Do You Need an eCheck Payment Processor?

Tranzpay provides ACH electronic check processing along with processing for credit cards, online bill pay, CashPay, QR codes, and more. We can support your inbound and outbound payment processing needs while maintaining security and convenience.