Positive Pay is a Treasury Management service to detect fraud in both paper and electronic payments.
Positive Pay works by matching the dollar amount of each check, the check number and the account number that is presented for payment against checks that have been previously authorized and issued by the business. If these three components do not match up, the check is not paid.
Facets of Positive Pay
Without security checks like Positive Pay, a company’s funds are put at risk due to fraudsters and identity thieves who can create counterfeit checks. The Positive Pay service ensures that if the check does not match the correct identifying information that the bank has on hand, the check is not honored.
If a check does not match the account number on the check, the dollar amount and the check number, the bank has the option to flag the check, notify a business representative from your company and seek permission to clear the check if it turns out to be valid.
Daily Transmission of Files
The Positive Pay system is simple to use once you understand how it works. As your business issues checks, you will need to transmit a list to the bank containing check numbers, issue dates and dollar amounts of the checks.
When a check is presented to a bank that does not have a “match” in the transmitted file, it becomes what is known as an “exception item.” When an exception item is found, the bank will contact the client, who will then review and instruct the bank to either accept or deny the check presented.
Each day, the client is sent any checks that have come back as suspicious. The company then has the ability to give its decision to the bank the same day. By catching unauthorized checks before they have the chance to clear in your account, companies can save hundreds, thousands or even more in financial losses due to fraud.