Electronic Checks Frequently Asked Questions

Frequently Asked Questions

This article address the most commonly asked questions about ACH electronic check processing. If you are thinking of setting up an echeck account, this article will be helpful to you.

What is an electronic check?

An electronic check is an form of payment whereby the money is transferred electronically from a buyer’s bank account to the seller’s bank account.  These transactions are called electronic checks because the merchant or biller uses a check as a source document for the consumer’s account information (RCK, POP, ARC) or the consumer is prompted to use their check as a reference to provide their account information (WEB, TEL).

What types of transactions do electronic transactions include?

• WEB (Internet based)
• ARC (mailed payment check conversion)
• POP (check conversion-POS)
• RCK (NSF check recovery)
• TEL (telephone)
• PPD (consumer pre auth recurring one-time debit)

Is electronic check processing a new service?

Electronic checks have been used as a payment option for years.  All types of businesses offer electronic checks to increase sales, improve cash flow, and give customers a convenient method of making payments

Can Internet and MOTO (mail order/telephone) merchants accept echecks?

Yes.  Electronic checks can be offered as payment option for any type of transaction for all types of merchants.

Will electronic checks save merchants money?

Yes.  Merchants offering electronic checks as a payment option save money by decreasing operating costs, bank fees, return check collections costs and credit card fees.

How do the costs for processing echecks compare with credit card processing?

Electronic checks save merchants 50-90% over credit card transactions.  Most businesses pay a low flat-rate per transaction for electronic checks.  Credit cards charge a discount rate plus a transaction fee.

How quickly will the merchant receive settlement of funds?

Settlement of funds depends upon the electronic check processing..  For Check 21 electronic checks, settlement is generally next business day.  For ACH processing settlement is within 2-4 business days

What training will be needed for customer service agents?

No special training is needed.  Electronic checks are accepted in the same way as credit cards.  The only difference is that bank routing and account numbers are entered rather than credit card information.

Can echecks be used for international charges?

Presently, echecks are available only in the U.S. and Canada. Other options can be used for international payments.

Can consumers “chargeback” purchases like they can do with credit cards?

Contingent liability for chargebacks is much lower for electronic check transactions than with credit cards. With credit card transactions a consumer has 6 months (180 days) to charge back a credit card transaction.

For ACH electronic check transactions, a consumer has 60 days from purchase date to chargeback..  Check 21 electronic check transaction chargeback period is 40 days.   Business to business echecks have a 3 day chargeback periods.

Can the merchant’s bank can provide electronic checks as a payment option for internet/MOTO merchants. 

Most banks do not provide electronic check services for internet / MOTO merchants.

Where will an Internet check transaction appear on the consumer’s bank statement?

For electronic checks processing with Check 21, a complete description of the transaction is included in the area where checks are listed.    For ACH electronic check processing, the transaction appears as a line item in the same area as payments such as direct payroll deposits and ATM transactions, are listed.

Is this process regulated and safe for consumers?

Companies that process payments electronically (electronic checks, credit cards, ATMs) must adhere to government-mandated guidelines. The electronic process is governed under Regulation E, which governs all electronic processing, including ATM and credit card transactions.  ACH electronic checks are governed by NACHA rules.  Check 21 electronic checks are governed by UCC and long-established check regulations.

How is a rejected transaction handled?

Merchants have full online reporting and can track the details of all transactions.  Rejected transactions can clearly be seen in the reporting details.  The report contains all the information necessary to identify the returns so that you can decide whether to contact the consumer directly to follow-up.

Will the customer’s checking account be secure?

Yes, echecks are actually more secure for consumers than paper checks.  Paper checks are handled by more people in the payment process before arriving at the bank.

Conclusion

This article addressed some of the most frequently asked questions about electronic checks.

Echecks are the most popular alternative payment method for US buyers. More than 30% of internet retailers accept checks online.

Are you interested in an echeck account?

Contact info@NationalACH.com today

Global eCommerce with Echecks

Want More Orders. Accept Checks Online

Global ecommerce companies that target the US market often ask “Can we add electronic checks as a payment option to capture more sales from US buyers even if our company is not located in the US?”

The answer to the question is yes.  International companies can establish ACH payments and Check 21 electronic check processing accounts in the US.

Ecommerce companies in Canada, Europe, Asia, Australia and other parts of the world that want to get more orders from US shoppers routinely add echecks on the checkout page.  

The benefits of having echecks as an alternative payment methods on your checkout page are well known.

Benefit of Electronic Checks

Most global ecommerce merchants are well aware of the necessity of having local payment options. The more ways customers can pay you, the more sales you make.

In the US, electronic checks are the most popular alternative payment method. Millions of Americans routinely use echecks to make purchases online.

More than 30% of Americans do not have cards or are maxed out on cards. Yet 95% of US households have a bank account and can pay you with an electronic check.

Applying for an Echeck Account

The paperwork for setting up an echeck accounts include filling out an application form and submitting standard due diligence documentation.  The documents include corporate documents from the country in which the company is established, payment processing history (if available), financial statements, and information about the products and services being sold.

Allow 14  business days from the time the paperwork is submitted for an account to be approved.  Once approved, payment processing can begin immediately.

Conclusion

Echecks debit funds from buyers’ checking or savings accounts to pay for goods or services.  Funds are settled to your business bank account.

An echeck account gets you more sales from US shoppers.  Give buyers who do not have credit cards another way to purchase from you .

Want to get more orders from US Shoppers?

Contact info@nationalach.com today

International Credits and Debits

A credit is when the bank is disbursing funds.  It is easy for banks to do an international direct deposit account for credits.  The bank knows the credit history of the customer.  It has the data to decide if the account should be credited immediately.  Or, the bank may decide to allow the customer limited use of the funds.  Or wait to disburse until after the FX settles.

A debit is when the bank collects funds.  Processing debits is more challenging than processing credits.  Debit transactions require that the bank determine the credit worthiness of both its own customer and the person on the other end of the transaction.  The bank has several choices

• Make all the funds available 2 days after the collection request. This often is standard operating procedure for transfers within a single country.
• If bank’s customer has enough money in his account or an adequate line of credit to cover any losses, a bank may decide to make funds available on international transactions as well.
• The bank can set a certain number of days.  The number is based on the clearing and float period in the other country.
• The bank may make only a percentage of funds available after a preset number of days.  Then, the bank can slowly release funds until 100% have been credited.  This can be very profitable for the bank as it takes advantage of float.

For more information, contact info@nationalach.com

International ACH

An international payment via ACH refers to a credit or debit entry that with a financial entity located outside of the jurisdiction of the US.

Typical uses for international ACH are:

1. Payroll.  For example, a US or multinational company has employees working and living offshore.  The US companies sends an ACH file to the domestic bank with which it does business.   The file is transmitted to the international branch of the US bank which then credits the employee’s accounts with their payroll, via international direct deposit.
2. Vendor Payments.   A U.S.-domiciled company is a subsidiary of an offshore multinational corporation The parent company has centralized many of the global treasury, functions of its global subsidiaries in a location outside of the US.  Vendors are paid from the international company headquarters.
3. International Remittance.  For example, sending money to family members located outside of the US.
4. Pensions. A US company makes payments to retirees living outside of the US.

For more information on international ACH, contact info@nationalach.com

Associations Set International Payments Standards

The International Payments Framework is a membership association currently made of around twenty banks and central banks, clearing and settlement mechanisms, associations and software vendors based in Europe, the US, Canada, Brazil and South Africa working with international payments.

  The goals of the association include:

• Defining rules, standards and operating framework
• Simplifying non-urgent cross-border credit transfers
• Leveraging existing payment networks and International standards e.g. ISO 20022
• Enabling interoperability between domestic and regional non-urgent payments systems and banks

The association was formed in response to globalization.  Internationally, there are increasing numbers of organizations that need inexpensive, simplified payment mechanisms for sending and receiving international payments worldwide.

In the US, the National Automated Clearing House Association (NACHA)  is has implemented a new International Automated Clearing House (ACH) Transaction (IAT) rule.  The rule will simplify international payments and allow for fuller automation and tracking of all payments.

Interested in international payment processing?

Contact info@nationalach.com today

SEPA Direct Debits Encounter Resistance from End-Users

Single Euro Payments Area (SEPA) direct debits have been slow to replace national direct debit systems.  Part of the reason is that consumer groups are warning against the SEPA system.

Europe has working on the implementation of SEPA since 2007.  The goal of SEPA was standardization of payment standards the 31-member EU/EEA member countries.    The Payments Services Directive (PSD) provides the legal groundwork for SEPA.

Critics of SEPA direct debits say the system was created with the input of end users, including consumers, businesses, and insurance companies.  Opponents of the system say the system is open to fraudulent transactions because of the inability of the debtors’ bank to intervene once the payment has left the account and is in the hands of the creditor.  This makes it almost impossible to dispute transactions.

In addition, the PSD requires only an International Bank Account Number (IBAN) and a Bank Identifier Code (BIC) for transactions.  Critics say this is not enough information to protect against fraud.  A ruling by a German court to require account holders’ names and addresses in addition to IBAN and BIC was overruled by the PSD.  German consumer groups are now warning consumers against using the SEPA direct debit system.

Given the current situation, there seems to be little reason for consumers to use SEPA direct debits when they can easily continue to use national direct systems instead.

For more information, contact info@nationalach.com