Positive Pay

A Brief Overview

Positive Pay: An Introduction

Positive Pay is a powerful, yet very simple process in preventing check fraud. While each bank utilizes Positive Pay in slightly different ways, the general process is universal:
After a company has issued checks (but before they distribute them), they provide a report of those checks to the bank. The report contains critical information such as the check numbers, dates, amounts and account numbers and is normally transmitted electronically. When the time comes for the bank to pay or not pay the check, they will compare the check to the Positive Pay report. If the information on the check is not identical to the entry in the Positive Pay report, the check is not paid until the bank can get an approval or denial from the company. This protects your company from check fraud because criminals cannot cash fraudulent checks just by using your account number. This also prevents payees from altering the check amount or other pieces of information.

Why is it necessary to use a Positive Pay software?

It's not. You can produce a positive pay file on your own, or even get your accouting application provider to set up a custom report (for as much as $3,000). But here are a couple of reasons why using a Positive Pay software would be in your company's best interest:

Data Format Manipulation
Banks require that the Positive Pay report (file) be in a specific format. With hundreds of accounting applications in use by bank customers, the bank would not be able to accommodate all of those different export formats. Postive Pay software acts as the go-between, converting the wide array of export formats into the single format required by the bank.

Internal Security
It has already been demonstrated that Positive Pay can eliminate nearly all external check fraud. But Positive Pay software allows your company to prevent internal fraud as well. With several security levels, a company can distribute tasks and enable supervisor review so that a person would need access to much more than just the accounting application or the check printer to be successful. Some software packages even come with secure transmission capabilities that eliminate the last opportunity to commit internal check fraud.

Positive Pay Today

Many bank customers are not concerned about check fraud because they are still under the impression that the bank must absorb all of the check fraud losses. But with check fraud expected to exceed $50 billion annually, the federal government has ruled that bank customers must also be responsible for check fraud losses. So now, not only do banks want their customers to be using Positive Pay, the bank customers can also read the writing on the wall. Banks expect that the number of customers using Positive Pay will multiply many times over in the next few years.

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