With the proliferation and rapid development of alternative payments, anything associated with checks seems old fashioned. That assumption is marginally based in reality – the use of paper checks is declining, and it’s generally assumed that the rate of decline is directly related to age.
But that’s not actually the case. Yes, it’s true that paper checks are in decline, but it’s more closely related to access to alternative and electronic payments than it is to the age of the user.
Another misconception is that eChecks are in decline right along with their paper counterparts. But nothing could be further from the truth.
For instance, while paper check usage has declined from 46% of transactions in 2002 to only 15% in 2012, ACH – one of the ways eChecks are processed – has grown from 11% to 18% in that same time period.
It’s clear that eChecks are perceived to hold benefits for their users, but what’s the value to both consumers and businesses?
Consumer Benefits of eChecks
The biggest benefit – and the only important benefit – for consumers is that eChecks make their lives easier.
Consumers have their debit cards for small transactions, and credit cards for large purchases at point-of-sale. But when it comes to high value transactions, or regular payments, consumers want a third option.
That’s where eChecks come in.
eChecks have the flexibility of quickly making one-time payment or authorizing regular transactions that are deducted from the consumer’s bank account. This is incredibly useful to consumers for things like rent, utilities, car loans and insurance premiums.
Business Benefits of eChecks
It isn’t just consumers that reap benefits from eChecks. And like consumers, the benefits to businesses speak to what is most important to them – cost savings, security, and cash flow.
Credit cards can be incredibly convenient, with funding available quickly and securely, but those features come at a high price. Credit card payments usually sport a flat fee per transaction, plus a percentage of the transaction amount.
eChecks, whether processed through EFT or ACH, are a more cost-effective means of processing payments, and usually only have a flat fee for transactions. Funds are received typically within a day.
It may take a little longer to get the funds with an eCheck than a credit card, but it’s much faster than the wait time for paper checks. Paper check processing can take 2 to 3 days, after the check is received and deposited. This doesn’t account for the handling by staff, time to run to the bank for deposits and so forth.
Check handling can also introduce a security challenge for payments. Checks require a high touch, from staff to record the payments, to postal workers delivering mailed payments, to bank personnel doing the end processing. Each touch presents a potential point for mistakes or an invitation for fraud.
Paper checks carry a lot of baggage, and thus are faltering and falling out of favor with both consumers and businesses. But their electronic counterpart, the eCheck, fills the need left in the wake of paper check’s decline. Why are eChecks still relevant, though, in the face of growing alternative payments? Because they continue to meet the needs of and provide benefits to both consumers and businesses.