Electronic check payment processing still excites
Today, more and more businesses are thrilled with the idea of setting up electronic check payments for their customers. That’s because for certain types of business, electronic checks (eChecks) provide plenty of benefits to make a merchant’s heart race, including dramatic cost savings with every transaction, automated payments and more.
As a small-to-medium-sized business (SMB) owner, are eCheck payments right for you? And if so, when’s the right time to integrate electronic check payment processing into your business?
Subscription-based businesses are growing in popularity.
News is, subscription businesses are growing nine times faster than companies in the S&P 500, and four times faster than U.S. retail businesses. Some are saying we have moved into a “subscription economy.”
Consumers are opting for the convenience of continual services, monthly deliveries and autopay, and merchants are responding with new ways to deliver subscription-based businesses––particularly online. And, both consumers and businesses need ways to set up these recurring payments.
Consider all of the online business you yourself may “subscribe” to, from language learning programs to pet food delivery to online magazines to genealogy sites to video streaming to non-profits.
Consider well-known names such as Ancestry, Pandora, Netflix, Chewy, Getty Images, Sierra Club, Lumosity, Dropbox and Babbel. Some of these subscriptions businesses have been around for decades, and some have recently burst onto the scene and into our lives, changing the way we live and buy without us even realizing it.
The benefit to subscription-types business is obvious: merchants make just one sale, and the revenue continues to roll in every month. It’s an appealing model that more and more SMBs are adopting. Due to the recurring payments that come with subscriptions, this type of business is primed to benefit from eCheck payment processing.
In fact, one-third of subscription services currently offer eCheck as a method of payment.*
How does electronic check payment processing work?
An eCheck isn’t actually a check at all. Rather than a paper check, it uses Automated Clearing House (ACH) to direct debit from a customer’s checking account into a merchant’s business bank account, with the help of a payments processor.
To set up eCheck payments, a business must first initiate the request to its customers online, by phone, or with a paper form, asking them to provide both their bank routing number and checking account number. Most businesses today have websites and can provide a secure form page for this customer information.
This information allows the merchant’s bank to communicate directly with a customer’s bank, and, once the funds are verified, the direct debit occurs. It takes a day or two for the funds to arrive in the business bank account.
The types of transactions that benefit most from using ACH processing are recurring monthly payments and/or a large sum. The reasons: efficiency, convenience, and savings.
What are the benefits of eChecks?
One of the main economic benefit of eChecks over credit card payments is the elimination of middleman card networks, such as Visa, MasterCard and American Express, and their associated interchange fees. Instead, with an ACH direct debit, merchants pay relatively low fees, and can experience significant cost savings.
Which brings us to the next benefit: there are no limits on the transaction amount. So if your business accepts large, lump-sum payments, the savings can be immense.
Another advantage of eCheck payments is that checking account numbers are far less likely to change over time than credit card numbers. Credit cards are often re-issued for any number of reasons, including loss or theft or other security measures. A bank account number may stay the same for decades. Therefore, a subscription-based business that sets up eCheck processing can prevent payment gaps and lost customers.
In addition, some segments of the population do not have credit cards but do have checking accounts, allowing businesses that accept eChecks to potentially reach these customers and broaden their base.
Is your business ready for electronic check payments?
To get up and running quickly, most startups will set up their business to accept credit and debit card payments. But, for certain types of business, certain types of transactions, and at certain times in the business life cycle, the time to set up eCheck processing may be now.
3 businesses that are primed for eChecks now:
1) If you have an established business that offers a recurring payment plan, or if you are intending to offer recurring payment options in the near future.
2) If your business forecast reveals rapid growth, you may offer eCheck payments for customers who pay larger sums, saving yourself credit card interchange fees.
3) If your business accepts large payments on a regular basis, you can save thousands of dollars annually by suggesting electronic checks as a payment option.
Talk to your payment processor about whether eChecks are right for you, when you should integrate this payment type into your offerings, and how to get started. Both you and your customers will appreciate the convenience, and the cost savings for even a small businesses can be enormous. Excited? Some businesses may say, yes!