What is an Electronic Check Deposit?

Malcolm Tatum

An electronic check deposit (ECD) is a type of financial transaction that makes it possible to streamline the process of depositing funds into a bank account. Rather than utilizing the steps involved in processing paper checks, the electronic approach relies on the transmission of data from the issuing institution to the receiving institution. While the processes may vary slightly, electronic check processing often makes use of images of the paper checks that can be processed with greater speed, making it possible to deduct the amount from the issuing account and credit it to the receiving account in less time.

Electronic check deposits eliminate the use of paper checks.
Electronic check deposits eliminate the use of paper checks.

One of the more common approaches to the electronic check deposit involves the creation of images of paper checks that can be transferred without the need to actually transport the paper checks from one location to another. Using a secure network transfer protocol, the scanned images can easily be processed by the receiving bank and credited to the proper account. At the same time, the transfer of the images to the issuing bank streamlines the process of verifying that the funds are on hand to cover the check amount, as well as allowing the issuing bank to debit the issuing account properly. As a result, recipients have access to their money sooner, and originators have updated account information in less time.

The use of an electronic check deposit approach is particularly effective for high volume clients who receive a large number of payments by check each day. Once deposited at the bank, the electronic processing makes it possible to release those funds for use in much less time, something that may be especially important if those funds are needed to settle any of the recipient’s debts that are pending. For example, a company that is depending on the received checks clearing in time to use the funds to manage an employee payroll will appreciate the speed that the electronic check deposit method provides in comparison to waiting several days for paper checks to clear.

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Some financial institutions provide strategies that allow their customers to actively participate in the initiation of the electronic check deposit process. Using special equipment, clients are able to scan the checks and forward the images to the bank via a secure connection. The bank in turn begins the process of crediting customer accounts and clearing the checks with the use of the images. This means that a company may scan and send check images to the bank in the morning rather than having to make a trip to the bank to physically deposit the hard copy checks in the afternoon, a time saver that expedites the clearing process.

Just about every bank and similar financial institution has some type of electronic check deposit offering that qualified customers can utilize. In some cases, the service is offered only to commercial customers, while others will allow any bank customer to make use of this approach. Since qualifications and procedures, as well as charges for the service will vary from one provider to another, consulting with bank personnel on the process and the fees involved before actually beginning to use this solution is recommended.

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