Check Processing

There was a time — not long ago, really — when a person wrote a personal check, the recipient delivered it to their bank for deposit and it was processed manually. The process could take days to complete, which meant the depositor had to wait for the funds to clear.

Today, new technology has eliminated much of the delay by turning a paper check into an electronic transfer (debit), also known as an electronic check or e-check. If you’re a merchant or service provider, this means funds are electronically transferred from a customer or client’s bank account directly into your bank account through the Federal Reserve Bank’s Automated Clearing House (ACH) system.

Electronic check payment processing is check cashing simplified, and a hassle-free and inexpensive way to get paid faster. It’s just one of many merchant services that Diversified Payments provides to help you meet all of your payment processing needs. 

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.

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.