To any customer who has ever had to search their bag for a checkbook they rarely use… then search deeper for a pen they rarely need, one advantage of an eCheck is clear. They’re convenient. There’s no need to write out by hand (who does that now?) the amount in numbers and letters. No need to hope they didn’t misspell the recipient’s name. No worrying about getting the year wrong when they’re writing a check in January. eChecks are just so much easier.
When you’re spending all day in front of a computer anyway, when you have an electronic device in your pocket that you can use to pay for a coffee, check your bank account and even make telephone calls, the idea of promising a payment to someone by writing it down on a piece of paper feels as antiquated as giving them a bag of doubloons (well, not quite!).
However, the convenience of eChecks applies to recipients as well as to payers. Few stores these days are willing to accept paper checks from people they don’t know. The risk is too great. Anyone can hand over a check for a million dollars but the payee won’t know if the buyer actually has a million dollars until they’ve taken the check to the bank… and waited for it to clear. All of that can take time, which means they can’t release the product. For online sellers and service providers in particular, paper checks have no place at all in their business flow. The checks can take days to arrive by mail then days more to clear. If they’ve already delivered a service, they’re left wondering whether the check really is in the mail, and if they’ve delivering a product, the delays are too long for both sides.
Even for large firms, such as insurance companies, that are used to sending out paper checks and that have structures in place to produce, approve and issue them, eChecks can create a process that is easier, faster and a great deal cheaper. Estimates of savings produced by a move from paper checks to eChecks are as high as sixty percent: eChecks require less manpower and lower deposit and transaction fees. Time savings could be as high as two to five days that would otherwise be lost waiting for checks to arrive and clear. Businesses that use electronic check conversion have reported receiving their funds nearly twice as quickly as companies that use paper checks. Billing companies can receive their payments within a day, and best of all there’s no trip to the bank with a pile of checks that have to be deposited and processed.
All of this translates to extra convenience for both sides. For payers, eChecks mean a more user-friendly process than writing a note on a piece of paper and they mean less time waiting for services as the bank processes the check or the mail deliverer finally hands it over allowing the business to make delivery. And, for businesses it means a much easier way of accepting money.
It’s no surprise then, that extra convenience for both sides should translate into extra sales for the seller and happier purchases for customers.
The benefits are particularly useful for small businesses. Not every seller is capable of accepting credit cards. For small payments, they’re barely worthwhile and sellers have always struggled to open accounts with credit card companies when they’re selling from a tent at an art fair or moving their goods at a garage sale. Companies like Square, that give away credit card readers that plug into the earphone sockets of smartphones, have provided one solution. But as earphone sockets are phased out of smartphones, sellers will need to keep other options open. Agreeing to accept eChecks makes it much easier for them to take payments and much easier for customers to make their purchases using a process that’s both simple and familiar.
eChecks also enable people to make online payments without using a credit or debit card, and without putting any money into an online payment platform. Both of these have valuable advantages. Not everyone uses a credit or debit card, and many of those who do use these cards worry too much about online fraud to enter their details into an online form. Filling an online account with cash can be inefficient if the buyer is uncertain how much they’ll need to pay in fees and therefore how much they’ll need to transfer to the platform in total. Because an eCheck draws funds directly from a bank account, the buyer only needs to use exactly the amount they need to pay. They won’t be leaving any funds in an online account they don’t intend to use again.
It’s that combination of extra convenience, a faster process for both clearing and notification if a check bounces, and lower costs that makes eChecks so attractive to both buyers and sellers. But there are other benefits too.
It’s no surprise that once you ditch the paper, the process also becomes greener. Until 2001, the process of moving checks from place to place was both physical and remarkably inefficient. The banks would load checks onto trucks for delivery to central processing centers. The centers would sort them then load them onto airplanes. Each day around $6 billion would be flown from place to place. The grounding of planes after 9/11 helped to push the passage of the Check 21 Act, allowing banks to transport digital images of checks instead of the checks themselves. That might have saved as much as 67.4 million gallons of fuel and 3.6 million tons of greenhouse gas emissions each year. (It also saved the banking system about $1.2 billion a year and gave customers and businesses around $2 billion worth of faster payment processing.)
But that process still depends first on the use of paper, even if those paper checks now travel no further than the distance from the bank teller to the scanning machine in the back office. The last official statistics measuring the use of paper checks date to 2012 but indicate that a little under 20 billion paper checks are written each year. That’s down from a peak of 49.5 billion in 1995 but it still represents a significant amount of tree-felling.
eChecks are also more accurate. The strange-looking numbers at the bottom of an old fashioned check are intended to make them easier for a machine to read, an innovation that dates back to the 1950s. But machines struggle to read the handwriting describing the name of the recipient and the amount he or she is due to receive. People can have a difficult time accessing the information sometimes too, and when they have to key in information manually, they make mistakes. Paper checks can also be mislaid and destroyed. They’re much more fragile than a secure and backed-up computer system.
eChecks are versatile. To use them you don’t need any more than an ordinary checking account, something that is available to anyone regardless of their credit record. Even if you can’t use a credit card or don’t want to use a credit card, you can still make — and receive — digital payments using eChecks, including for online purchases.
The benefits of using eChecks are many, and also include:
- Low-cost for both customers and businesses.
- High speed. Recipients don’t need to take a physical check to the bank, and banks don’t need to scan or transport them, cutting days from the processing.
- Greater accuracy. eChecks reduce the risks of mistakes during processing in comparison to physical checks.
- Environmentally friendly. eChecks aren’t written on bits of tree that will later be shredded.
- Greater convenience. eChecks are available to anyone and represent a familiar way to settle a payment.
eChecks are secure which is one more advantage which we’ll discuss in the next chapter.