Tips on eCheck Payments for High-Risk Industries

There are certain businesses, by no fault of their own, that are considered high-risk industries. As noted by Serenity Gibbons in another Due post, when you’re considered a high-risk industry or business, it’s more difficult to “find a reputable, secure, and fair high-risk merchant.” That can problems for eCheck payments.

What is a high-risk industry?

Examples of high-risk industries would include anything adult-oriented, travel, nutrition, call centers, and even eCommerce merchants.

However, just because you’re considered high-risk doesn’t mean that all hope is lost. There are still payment processors who will definitely work with you. On the downside, you may have to pay higher processing rates and fees.

While there may be no way around this, you can look into accepting eChecks to lower your merchant fees.

Why high-risk merchants prefer eChecks.

There are a number of advantages why high-risk merchants would want to start accepting eChecks.

For starters, only 7 percent of Americans do not have a bank account. Since an overwhelming majority of the country has access to a bank account, offering this type of payment means that you can boost sales.

Another perk is that you’ll gain a competitive edge. Remember, not all of your customers have a credit card, but they do have a bank account. Since you offering their preferred payment method, you can take away business from your competitors who don’t.

And the final reason you should accept eChecks is that they’re cheaper and faster to process. In most cases, it costs under a dollar to process. And the funds are usually available either the same day or next business day.

Tips on eCheck payments for high-risk industries.

Are you sold on eChecks? If so, here’s a couple of pointers to help get you started.

Find the best high-risk merchant processor.

Because you’re high risk, you’re going to have to find an eCheck processor that will work specifically with high-risk industries. A handful of suggestions would be Payment Cloud, Durango Merchant Services, Payline Data, Instabill, and Vantage Payments.

When searching for eCheck processor, make sure that they’re PCI compliment to protect you further. And, don’t forget to find a processor that fits your specific needs. For example, some processors will not work with businesses that are involved with adult-oriented businesses. So look into this before signing a contract with them.

Once you do find a processor, follow the procedures that they recommend. If you don’t, you may lose your account.

ACH or Check 21?

When it comes to processing eChecks there are actually two technologies that are used.

The first, and most well-known is ACH processing. Using the ACH network enables the electronic fund transfer process from one bank to another.  NACHA regulations guide the network. For example, chargebacks must be kept under 0.5 percent while returns rates must be kept under 15 percent.

The second is Check 21. Also known as the Check Clearing for the 21st Century Act, this United States federal law permits digital check creation. This “substitute check” must be cleared through the Federal Reserve.


In the past, Check 21 was faster than ACH, but same-day ACH has changed that. Disputes are also handled differently. With Check 21, customers can file a dispute within 40 days or filed personally at the customer’s bank.

How payment disputes are handled.

ACH, however, allows customers 60 day to file a dispute. Disputes can only be filed over the phone. Furthermore, payments in Check 21 are sent directly to merchant, while ACH goes through broker/processor before it’s sent to the merchant.

Furthermore, ACH processing requires a US depository account to set-up an account. Check 21 processing is available for international merchants – even if they do not have US depository accounts.

Prioritize ACH.

While there advantages to Check 21, banks tend to prioritize ACH payments. That’s because electronic fund transfers must enter the bank’s system early. This process places funds on hold and makes them unavailable for other transaction types.

And, if a customer overspends, you are should still be able to receive your funds.

Reduce chargebacks.

For high-risk businesses, chargebacks are a persistent concern. While you may never be able to completely eliminate chargebacks, try to avoid them as much as possible.

Want to know how? Here’s a couple of pointers from Due co-founder Chalmers Brown;

  • Address Verification System (AVS) ensures that the cardholder’s address and zip code matches the information at the card-issuing bank.  
  • Card Verification Methods (CVM) like the three or four digits found on the back of the card add to validation checks.
  • Payer authentication programs require customers to enter a password.
  • Real-time authorization sends the card information for immediate approval.
  • Keeping a database of any fraud attempts, problem customers, chargebacks, and customers receiving refunds can lower fraud risk.
  • Ensuring a customer is an actual person by verifying email address format and the mailing address can also lower fraud risk. 
  • Not shipping any order until it’s been authorized and verified by the card-issuing bank prevents some fraud attempts.
  • Use temporary activation codes if customers are downloading software.

On top of those tips, also make sure that you keep detailed records and thoroughly explain all of your products and services. Also, make sure that you use a clear merchant name, make refunds painless, and provide top-notch customer service.

Limit failed and larger transactions.

Here’s another tip from Chalmers. Fraudsters will keep trying to make a purchase until they can hack into an account. To prevent this from happening, “limit the amount of failed transactions that go through your payment gateway. It’s the norm to set the number at two to three failed attempts.

Also, be cautious of larger transactions. Fraudsters love to make larger transactions. Protect yourself by limiting purchases to a percentage of your average ticket or flat-dollar amount.

Increase fraud protections.

Compared to card payments, electronic checks have greater fraud protection. But, don’t completely overlook basic security measures. Again, be wary of failed and large transactions, as well as using encryption, two-factor verification, and updated software.

Albert Costill

Albert Costill graduated from Rowan University with a History degree. He has been a senior finance writer for Due since 2015. His financial advice has been featured in Money Magazine, Fool, The Street, Forbes, CNBC and MarketWatch. He loves to give personal finance advice to millennials.

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Albert Costill

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