What is positive pay?

Positive Pay is an automated fraud prevention service offered by banks to their business clients. It's primarily designed to protect companies from check fraud.

Here's how it typically works:

• Issue File Submission: A business creates and sends a file to their bank listing all the checks they've legitimately issued. This file includes details like the check number, date, payee, and amount.

• Verification: When a check is presented for payment against the company's account, the bank compares the check's information against the information in the issue file.

• Exception Items: If the check information doesn't match the issue file (e.g., the check number, amount, or payee is different), it's flagged as an "exception item".

• Pay/Return Decision: The bank presents the exception item to the business for a "pay or return" decision. The business reviews the suspect check image (often online) and instructs the bank whether to pay the check (if it's legitimate but wasn't included in the original file) or return it unpaid (if it's fraudulent).

Key benefits of Positive Pay:

• Fraud Reduction: It significantly reduces the risk of check fraud.
• Control: Businesses retain control over which checks are paid.
• Early Detection: It identifies potentially fraudulent checks before they are paid, minimizing financial losses.

Types of Positive Pay:

• Check Positive Pay: The traditional form, focused on verifying check details.
• ACH Positive Pay (or ACH Debit Block/Filter): Protects against unauthorized Automated Clearing House (ACH) debits. Businesses can specify which vendors or entities are authorized to debit their account via ACH.

Considerations:

• Implementation: Requires some setup to integrate with a company's accounting systems.
• Maintenance: Requires ongoing effort to maintain the issue file accurately and to review exception items promptly.
• Cost: Banks typically charge a fee for Positive Pay services.