Advantages & disadvantages of electronic checks

According to The Electronic Payment Association (NACHA), nearly 16 billion Automated Clearing House (ACH) payments were made in 2006. This figure represents a 14.5 per cent increase over the previous year. Both brick-and-mortar and online merchants frequently use electronic checks to process check payments. Electronic checks can simplify and streamline the payment process for customers who use checks and for merchants that accept check payments. However, there are also cautions involved with electronic checks.

With electronic checks, customers can receive instant acknowledgement of their payments. Merchants can be assured of the validity of a current account through the verification process. With electronic checking, customers can have 24 hour access to their current account transactions through electronic banking.

Processing payments online with electronic checks eliminates the need for stamps and envelopes, which saves time and money for customers. Processing electronic checks also saves money for merchants in processing costs, especially in the elimination of deposit and transaction fees. Electronic checks can also be an environmentally conscious choice, since less paper is involved in printing and processing the checks.

Anytime computers are involved with sensitive transactions, there are bound to be security concerns. Fraud by unscrupulous merchants is one danger; hacking into the electronic records or interception of a transmission is another. Enhanced security must accompany any electronic payment system. There is also the danger of human error or equipment failure which can jeopardise the accuracy of transmissions or records. Customers should check their banking records carefully for unfamiliar or unauthorised transactions. Finally, consumers should be aware that electronic checks are processed much more quickly than paper checks, sometimes within hours. This process has eliminated much of the "float" that previously delayed the presenting of a check for payment for several days.