Electronic Check Conversion Advantages and Disadvantages

An electronic check is a financial instrument similar to regular paper cheques. Unlike, physical cheques, e-cheque transactions occur electronically and are faster and more efficient.

Electronic Check Conversion

Electronic check conversion is the process of converting regular paper cheques to electronic format. In this method, the paper cheque is used as the source of information to read bank name, account number, payer name and other information required for the fund transfer.

This information is then used to perform a one time electronic fund transfer from your bank account to the payee. Electronic cheques function as the information provider for automatic electronic funds transfer. eCheck alone is not a payment method.

Advantages of eCheck Conversion

eCheck conversions are simple, faster, safer and cost effective. The important benefits are:

Less Processing Fees – eCheck conversions are fully electronic. This means, everything from the scanning of your paper cheques to the final fund deposit your merchant’s account happens electronically. Electronic methods require very less human interaction. Therefore, the processing fees when using eCheck conversions are less compared to physical cheques.

Easy to Convert – With appropriate equipments, eCheck conversion are easy. The cash clerks only have to run the paper cheque over the scanning equipment and the equipment will automatically read all the required information for verification.

Uses Existing Networks of Direct Deposit, ACH transfers – eCheck processing uses the same existing networks for ACH / direct deposit transfer. Once the eCheck verification is done, the next step is to use the information on eCheck to execute an electronic fund transfer. These fund transfer is performed using existing electronic fund transfer methods.

Governed by similar laws as paper cheques – A merchant using eCheck conversion has to inform the customer before converting his checks. According to Electronic Fund transfer Act, eCheck conversions are bound by the same laws of electronic fund transfers. In addition to these laws, electronic checks are also governed by same laws in which paper checks are treated.

eCheque conversion reduce the costs - When you see that average paper cheque processing cost $1.5 per cheque and eCheck conversion requires only $0.55 per cheque, you can see lot of savings. Therefore, the cost of using eCheck will reduce the operating costs of businesses.

Reduced Environmental Impact – Vehicles are one of the important reasons for increase green house gases. As eCheck transactions occur through electronic media instead of physical transfer through transportation channels, there is a reduction in green house emissions.

Works with leading Accounting Software – Modern accounting software are designed to work with eChecks. Thus, for business, using such software can reduce the processing time for shipping and delivery.

Disadvantages of eCheck Conversion

Electronic cheque simplifies the way people use cheques. However, just as any other methods, eCheck conversion also has some disadvantages.

Required Special Equipments – eCheck conversion requires special equipments. Banks, merchant institutions and other businesses will require investing in acquiring these equipments to fully utilize the advantages of eChecks. According to size of the firm, the cost of investment may increase.

Uses Computer Networks – Electronic method means computer networks are used for transferring data. This also means, the problems occurring on computer networks can affect the transactions of eChecks. There is also chance of fraud/phishing and other problems while using eCheck transfers.

Unauthorized Transactions – Unauthorized transactions can occur in eChecks too. Thus, it is always advised to keep record of your physical cheques. You can also check your bank statements for any unauthorized transactions.

Different from Other Payment Methods – Unlike credit card and debit card transactions, eCheck transfers are not instant. Therefore, if you are a seller, do not ship the items before clearing the cheques. eCheck conversion only make your paper cheques electronic. It does not ensure, you will definitely get your funds on time.

As you can see eCheck conversion has many advantages and disadvantages. However, the advantages supersede the limitations to make this one of the chosen method of paying somebody.