Technological advancements made tremendous changes in money transactions and it provides numerous options for people to make their financial dealings. Electronic money transactions emerged as the safest and rapid method to make financial dealings.
Paper cash and paper checks are getting a backseat in the present world where E-checks and digital transactions are getting more prominence. ACH and E-checks are two important terms in the financial world often used interchangeably but there are many similarities as well as notable differences between both of them.
ACH vs eCheck
The main difference between ACH and E-check is that ACH is a money transferring process using for the transaction of money from one bank account to another. E-check is the short form of electronic check and it is a method of payment using as a replacement for traditional paper checks.
Comparison Table Between ACH and eCheck (in Tabular Form)
| Parameter of Comparison | ACH | E-check |
|---|---|---|
| Definition | ACH is the name of a financial transaction process between a customer and a company or similar kind of transaction. | E-check is a method of payment using extensively as a replacement of traditional paper checks for present-day financial transactions. |
| Mode of function | ACH is working based on the information about the bank account of the customer to make the financial dealings. | E-checks are similar to the paper checks and the payment is made according to the preferences of the payer. |
| Transaction | With the information provided by the customer, automatic payment updates are possible with ACH. | E-check does not allow any automatic payment updates. |
| Type of payment | Many types of payments are possible through ACH and E-check is one of them. | Payment is only through the online processing of the E-check |
| Safety measures | Safety measures are comparatively less since you are providing the payment details in advance. | Multiple levels of authentication for the routing of funds to ensure safety. |
What is ACH?
Automated clearing house – ACH – are electronic payment process when a person gives authorization to a source entity like an institution or company to make a bill payment by direct debiting from his/her bank account.
In ACH mode of payment, funds are shifting from one bank account to another bank account via a centralized system, that is capable to direct towards the final destination. The computerized payments are beneficial to the merchants as well as consumers. The ACH payments are low-priced and easy to track because of their electronic base.
ACH networks are responsible when employers paying wages by direct deposit method to their employees. ACH networks are responsible when people are paying bills electronically from their checking accounts.
Some types of payments that can be activated through ACH are given below
- Payment made by a customer to a service provider
- Direct deposits made by a business owner to his/her employees account.
- Transfer of funds from one bank to another by a consumer
- Payment of funds by a business to the vendor.
- Funds sends by a taxpayer to the local organizations or IRS.
To make a payment through the ACH system, the company requesting a payment (either to send or to receive funds) requires to obtain the bank details of the other party. One the bank details of the customer is obtained; ACH can initiate the payment in the correct amount to the destination account.
In most cases, ACH payments are fully digital. But even today, some people like to use paper checks instead of digital payments but the fund transfer will be through the ACH gateway to the recipient.
What is eCheck?
An E-Check or electronic check is a method of fund transfer through the internet or similar data network intended to function as a regular paper check. The electronic format of the check makes its process in a few steps.
An E-check has many features to ensure security than regular paper checks that consist of authentication, electronic signatures, public-key cryptography, encryption, and so on. Direct deposit made by the owners of a company or business entity is one of the commonly used versions of an E-check.
E-checks can be issued and operated with comparatively less expense. E-checks are one of the digital banking method and part of a category of financial exchange called EFTs.
The emergence and fast spreading of E-commerce is the need that paved the way for the development of E-checks to make the transactions smoother and faster.
E-checks can be used for all the purposes of a paper check and similar legal bindings are applied in the case of its transactions. The lack of the need to print checks and posting it makes the usage of E-checks less expensive.
Main Differences Between ACH and eCheck
- The main difference between ACH and E-check is that ACH is an electronic payment transaction process whereas E-check is a method of payment.
- E-checks are usually paid through ACH and any types of online payments are possible through ACH.
- ACH is based on a centralized system but E-checks are between the payee and payer.
- E-checks are safe and authenticated by multiple levels of security. ACH can initiate payment updates from the previously collected data from the payers.
- ACH and E-checks use different flow of information. The legal bindings are different for ACH and E-checks. The risk management terms of ACH and E-checks are also different.
Conclusion
Electronic checks are easier to use and faster to provide results. It is more secure than a paper check and free of printing and postage expenses. They cannot be stolen like paper checks and their risk factor is comparatively safe. It can be used for the same purposes people used paper checks over the years.
The development of E-commerce opened the way for E-checks and they are the inevitable part of financial transactions in today’s world. Business owners like e-checks because of the fastness of the payment. E-checks are depended on Automated Clearing Houses – ACHs to process the transaction.
The combined security of E-checks and ACHs are powerful enough to keep the finances of people and financial transactions safe and secure. The lower processing costs as well as the less processing time are making them the favorite paying method of all.
References
- https://www.ingentaconnect.com/content/hsp/jpss/2008/00000002/00000002/art00011
- https://aisel.aisnet.org/jise/vol14/iss3/7/