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Accepting E-Checks

From increased security to reduced bank charges, the benefits are numerous.

Opinions expressed by Entrepreneur contributors are their own.

Q: How can electronic check acceptance benefit my business? And what equipment or services do I need to process e-check transactions?

A: We all know that consumers love writing checks. But let's face it--store owners are not always eager to accept them. And their reluctance is understandable, considering the risks and hassles traditionally associated with check acceptance. Fortunately for merchants and their customers, check payments are becoming faster, safer and more cost-effective, thanks to a process called check conversion.

Designed to mirror the credit card payment process, check conversion transforms paper checks into electronic transactions--also known as e-checks--that are securely processed in real-time. Funds from authorized payments are deposited automatically into merchants' accounts, usually within two business days.

Each year, U.S. consumers initiate an astounding number of e-check transactions, many of which are created though the check conversion process. According to statistics released by the National Automated Clearing House Association, more than 200 million e-check payments were processed in 2001. Of these transactions, 88.7 million originated at the point of sale. This considerable volume suggests that more shoppers are accepting check conversion as a quick and easy way to pay for goods and services.

It's not hard to see why e-checks are catching on. The conversion process is simple:

  • A customer presents a paper check at the point of sale.
  • The merchant uses a magnetic ink character recognition (MICR) check reader to scan the check and capture bank account information. (Some point-of-sale terminals also offer imaging capabilities, which capture address information for added security.)
  • The terminal electronically sends the account data and dollar amount of the sale to the check service provider for verification.
  • The check service provider approves or declines the transaction.
  • If it is approved, the customer signs a sales receipt, which authorizes the merchant to debit the customer's account.
  • The check is franked--that is, it is marked or stamped as processed--and voided; then it is returned to the customer, along with a copy of the sales receipt.
  • In as little as two business days, an automated clearing house (ACH) deposit posts the amount of the sale to the merchant's direct deposit account.

The benefits to merchants are numerous. For one, all converted checks are verified, usually at no extra charge. Better yet, merchants who use these services in conjunction with e-check acceptance are guaranteed their funds from approved transactions, because returned checks are the responsibility of their check service providers.

Other e-check acceptance advantages include:

  • Reduced bank charges.
  • Electronic batch closing, which eliminates errors and reduces time spent preparing and reconciling deposits.
  • Improved cash flow, due to faster closing and settlement.
  • Electronic deposits, which reduce trips to the bank.
  • Enhanced security.
  • Increased business and higher ticket amounts per sale.
  • Improved customer loyalty.

Accepting e-checks is easy. Established merchants who already own payment terminals and printers can usually connect MICR check readers directly to their existing equipment. New merchants--and businesses that want to upgrade their payment equipment--also have the option of using terminals with integrated check readers. These all-in-one units offer numerous advantages, such as:

  • Less cabling and clutter at the point of sale.
  • Increased counter space.
  • Freedom from compatibility conflicts (such as a terminal that can't accommodate the check reader).
  • Ease of use.
  • Automatic check franking.
  • Increased processing power. (Some terminals support additional payment methods, such as ATM/debit cards, stored-value and purchasing cards, or electronic benefits transfer payments.)
  • Reporting features that facilitate bookkeeping.

To process e-check transactions, store owners must also have merchant accounts with payment service providers that support check conversion. Most check verification services rely on databases of bad check writers to determine whether or not to authorize transactions. So it's important for merchants to go with experienced companies. One example is Telecheck, a leading provider of check services that helps merchants reduce risk and streamline operations. Ideally, fraudulent check activity should be captured as it occurs.

Thanks to increasingly advanced anti-fraud measures and technology that incorporates check readers into point-of-sale processing solutions, payment service providers can now offer e-check acceptance to more merchants than ever. This means growing businesses can safely provide customers with the same payment options and flexibility as their larger competitors. Simply put, e-check acceptance enables more businesses to maximize sales and customer service while minimizing their risk and costs.

Cardservice International Senior Vice President of Sales John Burtzloff is in charge of sales strategy and execution and thus is responsible for managing all aspects of the company's marketing, communications, telesales, check guarantee, new accounts and sales support activities.

The opinions expressed in this column are those of the author, not of All answers are intended to be general in nature, without regard to specific geographical areas or circumstances, and should only be relied upon after consulting an appropriate expert, such as an attorney or accountant.

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