E-CHECKS
An e-Check is nothing but electronic transfer of funds. With e-Check the money is withdrawn from a bank account which is generally a checking account. The routing number and the account number are both necessary to transfer funds from the account. The benefit of an e-Check is that it gets cleared faster than general written checks.
e-Check unlike other normal checks which is in paper form are actually filled online. The customer has to fill in information like their bank account number and routing number online. So, simply stated, e-Check is just an electronic form of a normal paper check. And you can use e-Checks as you use paper checks in any financial transaction. But e-Check has the added benefit of faster clearing and a more efficient processing associated with electronic payments.
WORKING OF E-CHECKS
e-Checks are mostly used by those who don't prefer cash as a mode of payment. They are the ones who have actually popularized the concept of e-Check. Actually, e-Checks are also like normal paper checks but they are electronic and they make use of digital signatures to sign and endorse. You would also have to use digital certificates to prove the paper is authentic and you need to provide the routing number and account number. The one who writes a check (payer) writes an e-Check through a computer and uses his digital signature to authenticate and then sends it using internet.
When the payee receives it, he has to verify the signatures and endorse it. And yes, he also has to write a deposit slip and sign it. This endorsed check is then emailed to the payee’s bank for deposit. There also the digital signature is verified and after the verification, amount is debited from the payer’s account. Cryptographic certificates that are used with e-Checks let a check payee know if the signatures are valid or not. Certificates are transferred with the e-Checks but researches are being on for letting these transmissions redundant.
To understand one more legal point. e-Checks could also be applied to a block of a document rather than the complete document. So, what this does is that it separates a part of the document from the entire document. So, your digital signature remains only where it has to be and not on the entire document.
Let us have a look at some of the benefits of electronic checks.
- Since e-Check is similar to any other paper check, so customers don't have problems in switching over to e-Checks.
- e-Checks are generally better for micro payments. E-Checks use conventional cryptography that makes it easier to process as compared to other systems that make use of public-key cryptography.
- e-Checks are better alternative for corporate markets. It is far more cost effective that what they are using as of now.
- Floats could be created with e-Checks and that is very necessary for commerce. Any third party accounting server could actually earn a lot of revenue by taking some fee from the buyer or seller. It could also serve as a bank and offer deposit accounts and earn from that pool of deposit accounts.
