An electronic cheque, or e-cheque, is a form of payment made via the Internet, or another data network, designed to perform the same function as a conventional paper cheque. Since the cheque is in an electronic format, it can be processed in fewer steps.
Additionally, it has more security features than standard paper cheques including authentication, public-key cryptography, digital signatures, and encryption, among others.
Electronic cheque processing is similar to paper cheque processing, only faster. Instead of a customer manually filling out a paper cheque and sending it to the business they need to pay, technology allows the process to happen electronically, saving both times as well as paper waste.
There are a few steps involved to process an electronic check:
Request authorization: The business needs to gain authorization from the customer before making the transaction. This can be done via an online payment form, signed order form, or recorded phone conversation.
Payment set-up: After authorization, the business inputs the payment information into the online payment processing software. If it is a recurring payment, this information also includes the details of the recurring schedule.
Finalize and submit: Once information is properly entered into the payment software, the business clicks “Save” or “Submit” to start the ACH transaction process.
Deposit funds: The payment is automatically withdrawn from the customer’s bank account, the online software sends a payment receipt to the customer, and the payment itself is deposited into the business’ bank account. Funds are typically deposited into the merchant’s bank account three to five business days after the transaction is initiated.
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