How Do eChecks Work? 

Scoop Canada Team
soubhik Business
7 Min Read
Source: OpenAI

An electronic check ( eCheck) is the digital version of the traditional paper check used since your great-grandpa’s day. It does the same job as a paper check except that it’s a faster, electronic version. Although it sounds like a little too much technology, it is really a far more convenient option that bridges the gap between paper and digital and can be used for just about anything.

Here, we’ll answer all your eCheck-related questions.

What Is an E-Check?

At its core, an eCheck is essentially a digital representation of a paper check. Instead of physically writing out an amount and handing over a piece of paper, you provide your bank account information electronically. This is usually just standard personal information like your routing number, account number, and the amount you want to pay. Due to its electronic nature, an eCheck mimics the functionality of a conventional paper check but offers several advantages. 

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Source: Unsplash

With eChecks, you enjoy more streamlined processing and enhanced security features, and best of all, you save on costs.

The top two countries currently incorporating eChecks into their systems are Canada and the United States. eChecks allows users to pay for basic recurring bills like rent, mortgage, or subscriptions. They can also be used to make high-value payments like car payments or even recreational payments. Many casinos are experimenting with new payment methods, with some including electronic checks (eChecks) in their list of payment options. 

How eChecks Work?

The cash flow using an eCheck usually goes this way:

  • Initiation: The person making the payment initiates the eCheck transaction. Instead of physically writing a check, they provide the necessary information online.
  • ACH Network: The eCheck is then transmitted through the Automated Clearing House (ACH) network. This network connects all U.S. banks and facilitates funds transfer between accounts. In other countries, there may not be a central network that authorizes eChecks in this way. 
  • Withdrawal and Deposit: The money is withdrawn from the payer’s account and deposited into the payee’s account, and all of it is done online. The ACH network ensures the proper routing of the funds.
  • Security Features: eChecks have robust security features, including authentication, public key cryptography, digital signatures, and encryption. These measures protect against fraud and unauthorized access.

Canada’s eCheck System

Determining a single “powerhouse” behind Canadian eChecks is challenging due to the ecosystem’s structure. Unlike the United States, which relies on the centralized ACH network for eCheck processing, Canada utilizes a decentralized system involving various players. Here’s a breakdown of the key participants:

  • Banks and Credit Unions: They act as the primary facilitators of eChecks, offering the service to their account holders. They handle aspects like initiating eChecks, receiving eCheck information, and crediting/debiting accounts.
  • Payments Providers: Some non-bank institutions, like payment processors, might offer eCheck services within their platforms. They will likely work in collaboration with banks for the actual transfer of funds.
  • Payments Canada: This non-profit organization serves as the infrastructure for various payment methods in Canada, including eChecks. They operate the Automated Clearing Settlement System (ACSS), which facilitates the electronic transfer of funds between financial institutions. However, unlike the ACH network in the US, the ACS does not directly handle eCheck processing itself.
  • Other Networks: Some financial institutions might utilize private networks or partnerships with other institutions for eCheck processing instead of solely relying on the ACS.

Compared to the US, eChecks are less commonly used in Canada. This might be due to the wider adoption of alternative online payment methods like Interac e-Transfer.

Benefits of Using E-Checks

eChecks may be the new kid on the bloc, but they have many advantages that traditional checks can only dream of. Here’s the breakdown of some of them:

  • Cost Saving: Issuing an e-check is notably cheaper than printing and mailing a paper check. The absence of physical paper and postage reduces costs significantly. It is also better for the environment, a big plus if you’re looking to reduce your carbon footprint.
  • Efficiency: E-checks require fewer steps for processing, making transactions faster and more convenient. All the work can be done online without the need for the payer or the payee to go out and mail the check or collect the money physically.
  • Lower Risk: Since there’s no tangible item (like a paper check) to intercept, the risk of theft or loss is lower. Paper checks can easily be forged or stolen and used from the mail. With eChecks, no one apart from your bank even knows you’re making a check. 

The Direct Deposit System: Most Common Use of the eCheck

One of the most common and popular uses of e-checks is the direct deposit system offered by many employers. It allows employers to electronically deposit employees’ wages directly into their bank accounts. This is highly convenient for employees because they don’t have to walk around with cash on payday—a risky endeavor any day. They can also have all their money in one place and plan for it without actually using it all up as cash.


In summary, e-checks combine the familiarity of paper checks with the efficiency and security of digital transactions. As businesses and individuals increasingly embrace electronic payment methods, e-checks continue to play a crucial role in modern banking. They provide a secure and efficient alternative to paper checks, offering a familiar payment method in a digital world. By understanding the process behind eChecks, you can begin to use this convenient option for various transactions.

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