Key Takeaways
- Bank verifies checks against pre-approved list.
- Flags mismatches for business review to prevent fraud.
- Multiple Positive Pay types suit different fraud risks.
What is Positive Pay?
Positive Pay is a bank fraud prevention service that helps businesses detect and stop unauthorized or altered checks by comparing each check presented for payment against a pre-submitted list of approved check details. This automated verification safeguards your account by flagging discrepancies before funds are withdrawn.
The service can also extend to electronic transactions, aligning with standards set by NACHA for ACH payments, providing multi-layered protection against fraudulent debits.
Key Characteristics
Positive Pay offers several core features designed to enhance payment security:
- Automated Matching: Banks cross-reference check details like number, amount, and payee against your authorized list to approve or flag payments.
- Exception Reporting: Discrepancies trigger alerts for your review, allowing you to pay or reject questionable transactions.
- Multiple Variants: Options include Standard, Payee, Reverse, and ACH Positive Pay, catering to different control preferences and fraud risks.
- Daily Updates: You submit issued check data regularly, enabling timely fraud detection and reconciliation.
How It Works
You start by submitting a file with issued check details—such as check number, amount, payee name, and issue date—to your bank, usually daily or per payroll cycle. When checks are presented for payment, the bank’s system verifies each against this list to confirm authenticity.
If all details match, the check clears automatically; if there are mismatches, you receive an exception report via an online portal to decide whether to approve or reject the payment. Default rules allow automatic rejection of exceptions if no response is given by a preset deadline.
Examples and Use Cases
Positive Pay is widely used across industries to prevent check and ACH fraud:
- Airlines: Delta uses Positive Pay to protect payroll and vendor payments from fraudulent alterations or counterfeit checks.
- Payroll Protection: Employers submit employee paycheck data to catch any unauthorized changes to payee names or amounts before checks clear.
- Vendor Payments: Businesses prevent losses by verifying supplier check payments, catching counterfeit or altered amounts in time.
- ACH Debit Monitoring: Companies approve known vendors to debit accounts electronically, flagging any unauthorized attempts in line with NACHA compliance.
Important Considerations
While Positive Pay significantly reduces check fraud risk, it requires diligent file submission and timely exception handling to be effective. Automating your review process or setting default actions can help manage volume and deadlines.
Integrating Positive Pay with tools like data analytics can enhance fraud detection and streamline reconciliation. For businesses issuing numerous checks, pairing this service with secure payment methods or selecting the best business credit cards can further strengthen financial controls.
Final Words
Positive Pay significantly reduces check fraud by automating verification against your issued payments. To maximize protection, review your bank’s Positive Pay options and set clear exception handling rules that fit your business needs.
Frequently Asked Questions
Positive Pay is a fraud prevention service where a bank compares checks or ACH transactions presented for payment against a list of authorized payments provided by a business, flagging any discrepancies for review to prevent fraudulent or altered payments.
Businesses upload a list of issued check details to their bank, which then automatically matches presented checks against this list. Any mismatches trigger alerts for the business to approve or reject, helping catch altered or counterfeit checks before payment.
There are several types including Standard Positive Pay, which holds suspicious checks for approval; Payee Positive Pay, focusing on payee-specific details; Reverse Positive Pay, where the bank pays matches and sends mismatches to the business; and ACH Positive Pay, which monitors electronic debits against approved vendors and limits.
Yes, ACH Positive Pay applies the same fraud prevention principles to electronic debits by comparing incoming ACH transactions against a pre-approved list of vendors, amounts, or limits, alerting businesses to any unauthorized activity.
The bank flags the check as an exception and notifies the business, which then reviews it through an online portal to decide whether to pay or reject the check, often within a daily deadline to prevent fraud.
Yes, businesses can set default rules such as automatically rejecting any mismatched checks if no manual response is provided by the cutoff time, ensuring timely fraud prevention without delays.
Positive Pay provides an automated second layer of review on payments, helping businesses detect and prevent check and ACH fraud early, reduce financial losses, and maintain tighter control over their outgoing payments.
