Check processing and acceptance

How are checks processed today?

Processing checks looks a lot different today than it did twenty years ago. Those who may have filled out long deposit slips and endorsing piles of paper checks may be surprised to learn that check processing, has in many ways, caught up with today’s technology.

Today’s check solutions allow you and your staff to capture an electronic copy of the check image for verification, processing and deposit. That cuts down on trips to the bank, reduces risk and makes deposits available to your business sooner.

eCheck processing technologies allow you to basically “authorize” the check payment in real time, much like a credit card transaction. You’ll discover right away if your customer is using an active account and has sufficient funds for the transaction.

What are the major types of check processing?

ACH and eCheck payment processing options combine the modern security of real-time authorizations with the convenience and familiarity of checks.

Check processing is sometimes referred to as eChecks (electronic checks, which is a type of electronic funds transfer or EFT) and ACH (Automated Clearing House). The methods of input and processing flow differ slightly among these methods—eChecks are eventually processed by ACH. Both types transfer funds between the bank accounts of businesses and their customers.

There are three primary ways “checks” are processed: traditional face-to-face paper check acceptance, Check 21 for accepting checks either face-to-face or by mail, and ACH payments.

Traditional face-to-face paper check acceptance. eCheck programs allow businesses to process checks at their point of sale, just like a credit card. Checks are converted electronically with a check reader or imager to capture essential account information like bank account and routing numbers. Additional information like a driver’s license may be required. Deposits are verified and deposited via ACH and typically clear within three business days.

Check 21 allows business to accept checks either face-to-face or remotely via the mail or a drop box. Check 21 allows merchants to process checks of any kind at their point of sale (customer-present) or remotely (customer not-present. Like face-to-face acceptance, Check 21 deposits are verified and deposited via ACH and typically clear within three business days.

The ACH (Automated Clearing House) is a network that facilitates payments between financial institutions. Even if you’ve never heard of ACH, you’ve probably used it. It’s the network behind popular peer-to-peer (P2P) payments, recurring payments like utility bills, and direct deposits from employers and government agencies. ACH payments are versatile because they can be initiated at the point of sale (POS), online, by phone or mail.

ACH payments used to take days, but that’s changing. The organization that administers ACH, NACHA is moving ACH toward same-day ACH processing. Phase 3 of same-day ACH went into effect in March 2018, going from same-day processing to include multiple processing “batches” throughout the day. Deposits that used to take five business days are now received much faster via ACH.

How to protect your business from fraud

Check processing services from a reputable payment processor can help your business reduce the risk of fraud from counterfeit checks. Real-time authorizations help reduce losses from non-sufficient funds (NSF) notifications and associated returned check fees.

Processing check services provide check verification and check guarantee. Check verification uses driver’s license information and other data points to electronically verify the customer against a database of known fraudsters. Check guarantee goes one step further, guaranteeing that the check is good by promising to reimburse your business even if the check doesn’t clear.

The security of check acceptance has come a long way since the days where merchants would take what information they could at the point of sale and essentially hope for the best. Security for check processing is now linked to the broader electronic financial system, making check acceptance safer than ever. Look to your credit card processor for comprehensive security and fraud-fighting solutions—however you accept payments.

How to get started accepting checks

When deciding whether your business should accept checks, start by asking “how do my customers want to pay?” Many businesses accept checks, from grocery and convenience stores to pharmacies and service industry business. Not every business necessarily needs to accept checks, but you know your business best.

If your business is ready to accept checks, the next step is to find a payment processor that strives to make check processing as safe, easy and convenient as any other payment method. We help businesses of all sizes keep payments safe.