High-Risk eCheck Processing

The Most Definitive Guide to High-Risk eCheck Processing In 2024

The way eCommerce websites accept transactions is a constantly evolving process. The categorization of certain merchants as high-risk makes it extremely difficult to process payments. While credit card payment processors are becoming more restrictive, alternative payment solutions like high-risk eCheck processing are emerging as powerful options for such merchants.

This comprehensive guide dives deep into the world of high-risk eCheck processing and offers excellent information, strategies, and expert advice to help your business grow in 2024 and beyond by using such solutions.

Understanding High-Risk eCheck Processing

What is High Risk eCheck Processing?

eCheck (electronic check) processing is a digital payment method that allows businesses to accept payments directly from customers’ bank accounts. This payment method is similar to traditional paper check processing but comes with the speed and efficiency of electronic transactions. High-risk eCheck processing refers to electronic check processing for high-risk merchants.

How High Risk eCheck Processing works:

1. The merchant initiates the transaction on the eCheck payment gateway.
2. The merchant submits the customer details, including the account number and routing number.
3. The request for transaction approval goes to the customer, who can verify the transaction through an SMS or by clicking on an approval link.
4. After the approval of the transaction, the merchant gets a PDF copy of the electronic check.
5. The check is submitted to the merchant’s business bank account for clearing.
6. The check clearing request is sent through the ACH network.
7. The customer’s bank receives the request and verifies the account and available balance.
8. The customer’s bank confirms the transaction, and funds are transferred to the merchant’s business bank account.

Fees for High-Risk eCheck Processing

A transparent fee structure is crucial for high-risk merchants seeking an efficient payment solution. Low transaction fees play a significant role in helping high-risk merchants reduce expenses and increase profits. At QuadraPay, we prioritize offering a transparent pricing structure to our merchants, clearly defining all rates and fees associated with our high-risk eCheck payment gateway. This transparency empowers our merchants to make informed decisions by understanding all the costs involved.

Our rates and fees vary depending on the industry in which the businesses operate. Some factors common to both low and high-risk merchants include waived set-up fees and no monthly fee for gateway usage. However, transaction fees differ between low and high-risk merchants.

While low-risk merchants typically have a transaction fee of 0.50%, high-risk merchants may face higher transaction fees of around 2.5%. Exact pricing for high-risk eCheck processing can only be determined after reviewing the merchant’s complete risk profile. For a comprehensive quote, we encourage you to contact us today, and we will provide you with the information within the next 24 hours.

Key Features and Benefits of High-Risk eCheck Processing

High-risk eCheck processing comes with a variety of features and benefits. These can be significantly utilized by small and large businesses operating in the United States of America.

Direct bank account debits: With electronic check processing, businesses can withdraw funds directly from the customer’s checking or savings account. When a customer provides their bank account and routing number, the merchant can initiate an eCheck-based transfer of funds from the customer’s account to their business bank account. This process does not require the customer to submit a physical check or share credit card information. It reduces dependency on the credit card network and comes with lower processing fees compared to card processors.

Automated Clearing House (ACH) network utilization: Behind the scenes, eCheck processing utilizes the ACH network, which is the secure electronic network for financial transactions in the United States of America. eCheck payment gateways use the power of the ACH network to process transactions and move funds from the buyer’s account to the seller’s account.

Widely accepted and trusted system: Electronic check processing utilizes the Automated Clearing House network, which is a well-established and highly regulated electronic fund transfer system in the United States of America. ACH has been used by financial institutions for many decades. eCheck powered by ACH makes it a widely accepted and trusted payment instrument. For high-risk merchants, this widely accepted payment solution can be a ray of hope.

Enables both one-time and recurring payments: High-risk merchants can use electronic checks to accept one-time as well as recurring payments. It is an excellent subscription payment solution used by a variety of e-commerce merchants in the United States. Merchants can set up recurring transactions on the eCheck payment gateway. Customers’ accounts will be debited on the exact date agreed upon for the recurring transaction. This feature is especially beneficial for merchants in subscription-based businesses, such as those that sell memberships or regular packages.

Supports high-volume transactions efficiently: While credit card processing is generally used for low-volume transactions, electronic checks are primarily designed to handle large volumes of transactions without worrying about increased costs. This feature is extremely beneficial for high-volume merchants who process larger transactions or deal with bigger order values. eChecks can very easily manage bulk payments, which makes the solution extremely useful for businesses of all sizes, from startups to large enterprises.

Faster settlement times compared to paper checks: Traditional paper check transactions still take 5 to 7 business days; however, in the case of eChecks, the transactions usually happen within 24 to 48 hours, which makes the solution preferred by most e-commerce merchants.

Improved cash flow: Quick availability of funds allows businesses to manage their finances better. By using electronic checks, businesses can pay suppliers quicker and reinvest in their operations faster. Faster access to funds allows businesses to manage their finances more effectively, pay suppliers quicker, and reinvest in their operations.

Reduced risk of bounced checks: With the eCheck payment gateway, merchants can verify check details before submitting them to the ACH network. Merchants can perform real-time internet bank verification that checks the merchant’s account number and routing number. Merchants can also verify if the customer’s account has enough balance to clear the transaction amount. The gateway also checks the transactions against previous bad checks, returns, and NSF (Non-Sufficient Funds). All these features reduce the risk of bounced checks.

Enhanced security measures: Advanced eCheck gateways come with various security features that protect the interests of account holders and merchants. These features include encryption of transaction data during transmission, which reduces the risk of interception and data theft. eCheck payment gateways also utilize authentication features that verify the identity of the account holder before allowing them to initiate transactions through the gateway. Two-factor authentication (2FA) is popularly used on all eCheck gateways to verify the user before giving access to the gateway. Advanced technology like tokenization replaces sensitive transaction details with unique identifiers.

All these security features and benefits help eCheck companies identify fraudulent transactions and stop them. Electronic checks have significantly lower risk compared to traditional paper checks. Customers have better protection against unauthorized transactions with these multi-layer security features. Regulations and guidelines provided by NACHA make eCheck a dependable payment processing solution.

Four Main Ways to Accept eCheck Payments

With our high-risk eCheck processing solution, merchants gain access to four robust payment modes that enable them to increase their sales volume. These eCheck payment modes benefit dynamic merchants who wish to accept payments through multiple sales channels. Let’s explore all of these options:

Face-to-Face eCheck Payments: This eCheck payment option empowers merchants to accept in-store payments. Customers provide the necessary details to the merchant, who initiates the transaction using a virtual terminal. Our eCheck virtual terminal is ideal for merchants operating businesses on the go. This mode is extremely popular with businesses in trade shows, consulting services, HVAC, freelancers, contractors, wholesale, equipment rental, and event management sectors.

Web-Based eCheck Payment Option: Our e-commerce API creates an eCheck payment option on the checkout page where customers enter their account and routing numbers to proceed with the transaction. Our comprehensive API documentation is remarkably advantageous for integrating popular content management systems like WordPress, WooCommerce, Magento, Joomla, and more.

Pay by eCheck over Email: This facility allows customers to receive a payment link via email. Upon clicking the link, customers are directed to an eCheck payment page where they can securely fill in their electronic check transaction details.

eCheck by Phone: For call centers seeking to accept electronic check payments, we offer the Pay by Phone eCheck facility. Call center executives can collect eCheck information securely and submit the transaction details to the Pay by Phone virtual terminal. Keep in mind that this feature requires additional scrutiny.

Industries that need high-risk eCheck processing

Some industries are considered to have a high risk of returns by banks. Merchants from such industries face serious challenges in getting merchant accounts. eCheck payment gateways help these businesses to stay alive and grow. Some of the industries where eCheck transactions are used a lot are the following:

Nutraceuticals and CBD products: The regulatory landscape surrounding CBD and nutraceutical products is not clear. This vague situation can potentially create legal challenges for merchant processors. These products may attract high chargebacks due to product efficacy reasons. Another challenge is the prevalence of subscription-based billing models. All these factors increase the risk, and thus eCheck is the most appropriate payment method for these merchants.

Online pharmacies: Similar to CBD and nutraceutical products, these online pharmacy merchants are subject to strict regulations and LegitScript licensing requirements. Many merchants that don’t have such certifications cannot get card processing accounts. Another challenge is high-value transactions. These challenges can be easily handled by eCheck payment gateways.

Debt collection agencies: eCheck has been widely used in the American debt collection industry. Because of bad industry reputation and consumer skepticism, most card processors say no to debt collection merchants. Collecting debt repayment on cards can potentially attract high chargebacks. The complex regulatory landscape (FDCPA) also keeps card processors away from such merchants. The industry is also well known for irregular payment schedules that create a challenge in forecasting card processors’ reviews. All these factors make debt collection an industry that can use eCheck for most of its transaction processing needs.

Payday loan providers: These merchants face high default rates among borrowers. Regulatory scrutiny, changing legislation, as well as reputational risks associated with high-interest lending make it tough for card processors to support such merchants. eCheck and ACH are the only stable payment methods for many payday loan companies.

High value transactions: Travel and timeshare businesses have high-value transactions that increase fraud risk. Seasonal fluctuations in cash flow is another thing that card processors don’t like. Long lead times between payment and service delivery increase the possibility of chargebacks. While airline and train booking companies may not like eCheck, other travel-related businesses can definitely use eChecks.

In general, any industry that faces more than average chargeback rates, has regulatory, legal, or reputational challenges, or has complex transaction patterns that increase potential for fraud or financial losses can use eCheck.

Application Process for High-Risk eCheck Processing

The application process to get a high-risk eCheck processing account starts with gathering the essential documents. To get the eCheck account approved, the merchant must provide some basic KYC (Know Your Customer) documents. These documents help the eCheck processor confirm the legitimacy of the company as well as the business owners.

Business License and Registration Documents: eCheck processors must know that the company is valid and is legally operating. For this, the merchant can produce the Certificate of Incorporation or a similar document.

Identification Documents of the Merchant: The business owners can produce a copy of their photo ID for identification proof.

Financial Statements and Bank Records: In most cases, eCheck processors will only ask for a voided check. This is required to confirm the bank information from where the charges of eCheck processing will be debited or the settlements will be sent.

Website URL and Product/Service Information: If the merchant operates an e-commerce website, then the URL where the product information is available should also be shared.

Best High-Risk eCheck Processors to Consider

QuadraPay is a well-known specialized eCheck solution provider that focuses on high-risk merchants. It offers eCheck processing as one of its primary services. eCheck services provided by QuadraPay cater to businesses that may have difficulty obtaining traditional merchant accounts. Our eChecks gateway is for merchants from high-risk industries and supports higher chargeback thresholds.

BiasPay: It is an excellent eCheck payment processor that caters to both low and high-risk merchants. They offer eCheck processing along with other payment solutions.

Emerchant Broker: EMB is known in the industry as a provider of high-risk eCheck merchant accounts. They offer high-risk eCheck processing as part of their suite of services, along with credit card processing.

PaymentCloud is a well-known provider of merchant services for high-risk businesses. They offer various high-risk payment processing solutions, including eCheck processing.

Durango Merchant Services is a well-established name in the high-risk payment processing industry. They offer eCheck processing along with other merchant services.

Merchants must look closely at the features, benefits, and pricing of these providers before making a decision. The most important factors include the pricing and fee structure. Committing to high fees can be expensive in the long run. Merchants should also check if the eCheck provider has the capability to integrate with the merchant’s website.

FAQ High risk eCheck processing

Q: What factors contribute to the popularity of eCheck as a payment method among American consumers?

A: Millions of American customers still need access to well-known credit and debit cards. However, these customers mostly have access to a regular bank account. The unavailability of credit and debit cards makes electronic checks extremely popular among American consumers. eCheck is a highly trustworthy payment solution that provides automated bank account debits and simplifies e-commerce purchases.

Q: How does eCheck work on WordPress and WooCommerce sites?

A: Our eCheck solution is compatible with WordPress and WooCommerce websites. An eCheck transaction is straightforward. The customer selects the product on the merchant’s website and adds it to the cart. On the cart page, the customer selects eCheck as their preferred mode of payment. The customer submits details (account number, routing number, name, address, and email) on the checkout page. After hitting the submit button, the order is set to processing mode, and in near real-time, the transaction is validated for account number check, routing number check, and fund availability check. If checks go fine, the customer gets an order success message. An error message will be shown if the validation fails.

Q: What is the dispute period for eCheck transactions?

A: eCheck payment processing offers various benefits. One of the critical benefits for buyers and merchants is the 60-day dispute window. With eCheck payment processing, disagreements can occur within 60 days. Merchants need to be aware of this timeline to respond to any disputes.

Q: Is recurring billing possible with an eCheck?

A: Yes! With eCheck payment processing, a merchant can offer recurring billing facilities to customers. With eCheck, merchants can accept one-time and regular payments. A merchant can set up recurring payments by keying the customer’s details into the virtual terminal. It can also be done through an email invoice or through a website where the customer fills in the details and opts for recurring billing.

Q: How can I integrate e-check with my shopping cart?

A: With our e-check gateway, you will get access to a ready-made plugin for WordPress and WooCommerce. This plugin is perfect for integration with shopping carts. To integrate the plugin, all you have to do is upload it to your e-commerce platform and update a few settings. That should be it. We also provide a detailed API document that will help you integrate e-check with custom shopping carts. For custom integration, you will need to write code for integration. Our API supports ASP.net and PHP codes for integration.

Q: Does eCheck really come with Higher Chargeback Tolerance?

A: Traditional merchant accounts shut down once the merchant’s chargeback ratio goes beyond 1%. In the case of high-risk eCheck accounts, merchants generally get a risk tolerance of up to 3%. With eCheck, merchants get a longer timeframe for addressing customer issues, which results in easier dispute resolution.

Future Trends in High-Risk eCheck Payment Processing

The team at QuadraPay believes that the high-risk eCheck payment processing landscape will continuously evolve. This evolution will be driven by technological advancements, changing regulations, and changes in consumer preferences. We anticipate that the following key trends will shape the future of eCheck processing:

Soon, eCheck processing companies will start using the power of AI and machine learning. This will help detect fraud in a better way and provide efficient risk assessment. It will also be helpful in offering personalized customer experiences.

NACHA has already started using Phixius, which is a Blockchain-based Technology. Such innovations will help in better security, faster transactions, reducing cost, and enhancing overall efficiency.

By utilizing Open Banking Initiatives, eCheck processing companies will find it easy to verify accounts. It will also help in data sharing between banks.

Somewhere down the line, we may see Cross-Border eCheck Solutions that allow merchants to accept eCheck along with other similar methods like fast payments, Interac, EFT, and ACH.

Final Words: Use Better eCheck Processing for Business Growth

With the phenomenal benefits and features, eCheck is definitely an excellent payment instrument for high-risk merchants. Business owners can partner with reliable payment processors that can help merchants with high-quality solutions. You may reach QuadraPay’s support team at [email protected] for more information and assistance in setting up your high-risk eCheck processing account.

Industry Resources

1. Phixius by NACHA
2. Automated Clearing House Activities: Risk Management Guidance