Dangers of eCheck [8 Problems Threatening Safety]

By Robert Courtneidge 16 Min Read

Thanks to the convenience that comes with eChecks (electronic checks) but there are also unsafe aspects. So, in this post, you will get to know the dangers of eCheck that your bank may not have notified of you in your email inbox.

With the rising instances of data breaches and personal data falling into the wrong hands, there’s an uptick in e-check fraud.

The convenience and increasing acceptance of e-banking also play a part in this. However, these electronic transactions do lack the protective mechanisms that come with in-person transactions.

Any good news? Yes, in this post, we have also explained measures you can take to protect yourself against the daring dangers of e-check transactions.

Is It Safe to Use eCheck?

Indeed, it is safe to use eCheck. eChecks are one of the most secure transaction methods accessible to individuals and businesses, and you can accept payment safely online. This is attributed to the authentication processes, duplication detection, encryption, and digital signatures. Owing to these features, eChecks assure a level of security that paper checks and debit card transactions can’t guarantee.

When you pay for a service or goods, you must physically carry your credit card. This practice not only exposes them to potential theft but also allows more parties to access their credit card information. Since eChecks are processed electronically, they eliminate such fraud concerns.

Similarly, eChecks offer greater security than physical checks, significantly reducing the risk of identity theft and forgery.

Top Dangers of eCheck

Dangers of eCheck

But as most things in life are binary, eChecks have both good and downsides you need to know to be able to protect yourself. Below are some of the dangers of eCheck to be aware of:

1. Cyber Fraud

Cyber fraud has always been a major risk with the use of eChecks. It involves the exploitation of online communication tools and using deceptive tactics. Here, cybercriminals obtain sensitive banking information, including account and routing numbers to create fraudulent e-checks, leading to unauthorized transactions that can result in significant financial losses.

The FBI’s 2020 Internet Crime Report revealed that the Internet Crime Complaint Center (IC3) received 791,790 complaints of suspected internet crime, with reported losses exceeding $4.2 billion.  As the use of e-checks continues to grow, the risk of fraud also escalates.

The solution? Businesses and individuals need to adopt strong security practices such as multi-factor authentication and ongoing vigilance to spot phishing attempts.

Moreover, the potential damage from cyber fraud extends beyond the initial financial loss. Once an account has been compromised, it can take time and resources to correct the issue, including closing and reopening accounts, disputing fraudulent transactions, and repairing any damage to credit scores or financial reputation.

2. Data Breaches

eChecks, though generally encrypted and authenticated, can still be intercepted by tech-savvy criminals during transmission, leading to the extraction of valuable banking information.

According to the 2021 Cost of a Data Breach Report by IBM, the global average total cost of a data breach was $4.24 million, a historic high. Data breaches can result in unauthorized transactions and potentially devastating instances of identity theft, making security of paramount importance for both individuals and businesses using e-checks.

Data breaches also lead to long-term consequences for the victims, including the potential for ongoing identity theft and fraud, damage to credit scores, and loss of trust in the affected company or service.

For businesses, a data breach can lead to reputational damage and loss of customer trust, which can have significant impacts on business success.

3. Errors and Technical Glitches

Errors and technical glitches are other dangers of eCheck. These can range from payments being debited from the wrong account to being applied to the wrong recipient. Experts even claim that human errors don’t even account for technological failures. Unfortunately, errors lead to financial complications and might not be immediately apparent or easy to resolve.

When there are errors, expect inconvenience and even penalties or fees. For example, if a payment is debited from the wrong account and that account does not have sufficient funds, the payment could bounce, leading to fees and potential negative impacts on credit scores.

The possible solution is for both individuals and businesses to ensure they are using reliable, up-to-date software. Moreover, you want to regularly check your accounts for any unexpected transactions.

4. Privacy Concerns

Privacy has always been a top question in the internet space. And now it is one of the dangers of eCheck. eChecks raise privacy concerns. Every time an e-check is issued, sensitive banking information is shared with the recipient and potentially a third-party processor. This data, if not properly protected, could be misused, mishandled, or accessed by unauthorized individuals.

Furthermore, privacy breaches can have long-term impacts. Once sensitive information is exposed, it can be difficult, if not impossible, to fully control how it is used or who has access to it.

5. Inequitable Access to Technology

Speak of convenience and efficiency, then you have eChecks over paper checks. However, there is a question of equitable access to technology. The United Nations reported that 2.9 billion people in the world do not have internet access.

And for those without reliable internet access or those who are not comfortable with or capable of conducting online transactions, e-checks may not be a viable option. This can be a problem. For example, people without access to e-checks may have to rely on more time-consuming or costly methods of payment. They may also face barriers to accessing certain services or businesses that primarily use e-checks. Businesses can face challenges in reaching customers who do not have access to the necessary technology.

6. Potential Misuse by Recipients

Once a recipient or merchant receives an e-check, they have access to the banking information included in that check. This raises the risk of potential misuse. For example, a merchant could potentially charge the account without authorization or sell the information to a third party.

Potential misuse of banking information can have negative impacts, including financial loss, unauthorized transactions, privacy breaches, and identity theft. These mean stress and inconvenience for the victims who attempts to resolve the situation.

7. Regulatory Grey Areas

Regulatory issues represent other potential dangers of eCheck. eChecks are not regulated in the same way as traditional paper checks, which have established laws and procedures for handling fraud and disputes.

They also differ from credit and debit card transactions, which are governed by different protections. This can lead to confusion and potential vulnerabilities when it comes to consumer protection and dispute resolution. For example, if a dispute arises over an eCheck transaction, the following difficulties arise:

  • it may be unclear who is responsible for resolving it;
  • what rights the consumer has; and
  • what procedures to follow.

These can cause delays in resolution, financial loss, and frustration. Therefore, it helps to understand the regulations that apply to e-checks. Businesses should do well to communicate this information.

8. Dispute Resolution

The final significant concern related to e-checks is the complexity of dispute resolution. Because e-checks are electronic, there is no physical proof of the transaction, as there is with a paper check. This can make disputes more challenging to resolve.

Complex dispute resolution processes can lead to a range of problems, including financial loss, stress, and loss of trust in the banking system or the business involved.

They can also take significant time and resources to resolve, leading to further inconvenience for the consumer.

How Do I Not Get Scammed with eCheck?

While the dangers of eCheck can be daring, you can always deal with them with these simple conventional measures:

S/N eCheck Scams and Prevention


Confirm the Sender

Verify the identity of the sender. Be skeptical if you don’t recognize the sender or if the payment seems unsolicited or too good to be true.


Check for Standard Information

Ensure that the eCheck contains standard banking information, including the bank’s name, account number, routing number, and the amount of payment. Suspicious or missing information can indicate a fraudulent eCheck.


Use a Trusted Platform

Conduct eCheck transactions through a trusted platform or payment gateway. Be cautious if asked to download an eCheck from an email or a website you do not recognize.


Monitor Your Account

Keep a close eye on your bank account after depositing an eCheck. If the eCheck bounces or causes any unusual activity, it could be a sign that it was not authentic.


Contact the Bank

If unsure about an eCheck’s authenticity, contact the issuing bank for verification. They can usually confirm if an account number is legitimate or if there have been other reports of fraud from that account, despite certain privacy laws.


Trust Your Instincts

Listen to your intuition. If something seems off about an eCheck, it’s better to err on the side of caution and verify before proceeding.


Be Wary of Overpayments

Be skeptical if someone sends you an eCheck for more than the agreed amount and asks you to refund the difference. This is a common eCheck scam tactic.


Confirm Before Shipping Goods

If you’re a business, ensure that the eCheck has not only been received but also cleared and funds have been deposited into your account before you ship goods or provide services.


Understand eCheck Processes

Familiarize yourself with how eChecks work. It can take several business days for an eCheck to clear, so even if funds appear in your account, the eCheck can still bounce. You’ll be responsible for any funds you’ve spent if this happens.


Report Suspicious Activity

If you suspect you’ve been targeted by an eCheck scam, report it to your bank and the appropriate authorities. In the United States, for instance, this could be the Federal Trade Commission or the FBI’s Internet Crime Complaint Center.

Can a Bank Verify an e-check?

If a fraudulent transaction is carried out at a vendor’s end using a credit card, the responsibility falls on the vendor who should have verified the signature. With a physical check, the responsibility shifts to the bank who must validate the signature for transactions over a specific amount. However, when it comes to electronic transactions, the responsibility rests with your company, due to the limited options for verification.

If eCheck fraud occurs, banks aren’t held responsible for money withdrawn from accounts, since they have no means to identify the fraudulent nature of the transaction.

A basic verification process only confirms that a routing number is valid before processing the transaction. A higher level of verification checks for the correctness of the routing number, account number, and account name.

The most stringent verification level demands confirmation of ownership for both the accounts involved – the debiting account and the crediting account. However, this level of security is primarily seen in transactions completed within a single financial institution, such as mortgage or auto loan payments.

Implementing the highest level of verification is a significant challenge for most merchants. Many are hesitant to establish such stringent protection measures, as they could inadvertently flag legitimate transactions. Scenarios that might trigger false flags include many transactions being processed in a brief span or recurring payments from various accounts like a parent paying off a child’s credit card bill.

While a PIN might help for extra verification, it is not a possible option currently because of how eChecks work, given that real-time verification can’t work between banks. This would mean an overhaul of the entire banking system.

Frequently Asked Questions

Can eCheck Be reversed?

You can reverse electronic checks at different stages. If the funds are already on their way to your bank, you might need to issue a refund. Your payment provider can assist you with this.

Are eChecks safer than credit cards?

eChecks are highly secure for online payments. Unlike credit cards, they can’t be lost or stolen. With bank account verification, it’s difficult to commit fraud with eChecks.

How long does an eCheck refund take?

eCheck refunds require clearance from the sender’s bank before they can be received. Typically, this process takes up to 5 business days to complete. However, please note that weekends and holidays are not considered business days and may result in longer processing times.

Read alsoHow to Pay with eCheck and How Long It Takes

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Independant Industry Expert in Payments and the Digital Future of Money, Co-Editor of The PAYTECH Book, top Payments Lawyer and voted No. 1 in Payments Power 10 at #PayExpo What do I do? I solve the problem of moving payments firms into the new era of money. Traditional financial services businesses risk getting left behind as Generation Z leapfrogs the banks, opting instead for big techs, challengers, and social commerce propositions. Ignoring blockchain technology and the widening knowledge gap between the financial services and digital sectors puts businesses at risk of falling behind their competitors, compromising their competitive edge, and ultimately becoming redundant.
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