Difference Between ACH and eCheck (With Table)

The advancement of technology has had a significant impact on money transactions, and it now gives consumers a plethora of possibilities for conducting their financial transactions. Electronic money transactions have emerged as the most secure and efficient technique of conducting financial transactions.

Cash and checks written on paper are becoming increasingly obsolete in today’s society, as E-checks and digital transactions gain in popularity. E-checks and automated clearing houses (ACH) are two essential phrases in the financial sector that are frequently used interchangeably. However, there are many parallels and significant differences between the two concepts.

ACH vs eCheck

The main difference between ACH and E-check is that ACH is a money-transfer method used to transfer money from one bank account to another. On the other hand, E-check is a document used to transfer money from one bank account to another. E-check is the abbreviation for electronic checks, and it is a method of payment that can be used to replace traditional paper checks in some situations.

In the e-commerce world, an ACH transfer, also known as ACH processing, allows businesses to send and receive money using their online bank accounts. You’ll find two distinct forms of ACH transactions on the internet. The ACH debit is by far the most prevalent. Bill and utility payments sometimes necessitate these kinds of payments.

An electronic check (eCheck) is a digital counterpart of a paper check that is used to begin a bank transfer. Using an eCheck, you can send a single payment from one bank to the other in the blink of an eye. An eCheck may be processed considerably more quickly than a physical check.

Comparison Table Between ACH and eCheck (in Tabular Form)

Parameters of ComparisonACHeCheck
DefinitionThe term “ACH” refers to a financial transaction procedure between a client and a business or other similar transaction types.According to the Federal Reserve, E-check is a means of payment increasingly being used to replace traditional paper checks in today’s financial transactions.
Mode of functionThe Automated Clearing House (ACH) relies on the customer’s bank account to conduct financial transactions.In many ways, e-checks are comparable to paper checks, with the payment being processed by the wishes of the payer.
TransactionThe usage of ACH allows for automatic payment modifications based on client information.Automatic payment updates are not possible with an e-check payment method.
Type of paymentE-checks are among the many types of payments made using the ACH system.Payment can only be made through the electronic processing of an E-check.
Safety measuresBecause you submit the payment information in advance, the security measures are reduced.To ensure the security of payments routing, many stages of authentication must be used.

What is ACH?

Electronic payment processes, such as automated clearing houses (ACH), are initiated when an individual provides written authority to a source entity, such as an institution or firm, to make a bill payment by direct debit from their bank account.

If you pay using the ACH mode of payment, monies are sent from one bank account to another using a centralized system capable of routing funds to their final destination. Both retailers and consumers benefit from the use of electronic payment systems. In addition to being low-cost and easy to track, ACH payments are also convenient because of their electronic foundation.

When employers pay their employees’ wages through the direct deposit method, the ACH networks are held liable for the payment. When consumers pay bills electronically from their checking accounts, the ACH networks are held responsible for the transaction.

The following are some examples of payments made via an ACH transaction.

  1. Business owners make direct deposits into the accounts of their employees.
  2. a consumer’s transfer of funds from one financial institution to another
  3. Vendor payments are the transfer of money from one company to another.
  4.  A taxpayer donates money to a non-profit organization or the IRS.

To make a payment using the ACH system (either to transmit or receive funds), the company requesting the payment (either to send or receive funds) must first collect the bank information of the other party. Once the customer’s bank account information has been received, the ACH system can initiate a payment in the proper amount to the designated account.

ACH payments are, for the most part, entirely digital transactions. Although some people prefer to utilize paper checks instead of digital payments, the funds will be transferred to the receiver through the ACH gateway, which is still available today.

What is eCheck?

An E-Check, often known as an electronic check, transfers funds over the internet or other similar data network that functions in the same way as a traditional paper check. Because of the check’s electronic format, it can be processed in a matter of minutes.

For example, an E-check includes numerous characteristics that make it more secure than a typical paper check. These include authentication, electronic signatures, public-key cryptography, encryption, and other security measures. In the United States, one of the most often utilized types of E-check is a direct deposit made by the owner(s) of a corporation or corporate organization.

E-checks are a type of digital banking procedure that falls under electronic funds transfers, or EFTs for short. To make transactions smoother and more efficient, the rapid growth of electronic commerce created a demand that opened the way to develop electronic checks.

E-checks can be used for every reason that a paper check can be used for, and the same legal obligations apply in the case of e-check transactions as they do in the case of paper checks. Because there is no need to print checks and mail them, using E-checks is less expensive than using paper checks. 

Main Differences Between ACH and eCheck

  1. The primary distinction between ACH and E-check is that ACH is a payment transaction procedure electronically, whereas E-check is a payment method.
  2. In most cases, ACH is used to process electronic checks, and it can be used to process any online payment.
  3. A central mechanism underpins the Automated Clearing House (ACH), whereas E-checks are exchanged directly between the payee and the payer.
  4. Multilevel security protects and authenticates e-checks, making them completely secure. By using the data that has already been obtained from payers, the ACH system can initiate payment updates.
  5. The flow of information between an ACH and an E-check is different, and the legal obligations associated with ACH and E-checks are distinct. Furthermore, the risk management terms related to ACH and E-checks are expressed.

Conclusion

E-checks are more convenient to use and offer results more quickly. In addition to being more secure than a paper check, it eliminates the need for printing and postal costs. In contrast to paper checks, they are not susceptible to theft, and the danger associated with them is low. It can be used for the same purposes for which paper checks have been used for many years.

Electronic checks were possible due to the growth of e-commerce, and they have become an indispensable aspect of financial transactions in today’s globalized economy. E-checks are popular among business owners because they can be processed and received. Automatic Clearing Houses (ACHs) are responsible for processing electronic checks (e-checks).

It is possible to keep the finances of individuals and financial transactions safe and secure by combining the security of E-checks with that of ACHs. These payment methods are becoming the most popular because of the cheaper processing costs and shorter processing times.

References

  1. https://www.ingentaconnect.com/content/hsp/jpss/2008/00000002/00000002/art00011
  2. https://aisel.aisnet.org/jise/vol14/iss3/7/