Positive Pay is a cash management service used by banks to prevent fraudulent check transactions. The issuing company sends electronic files of the checks to the bank, which are compared to the checks brought to the bank. Businesses typically have to pay banks for this service. Reverse positive pay is a cash management service whereby the company reviews check details instead of the bank. Many companies find such services well worth the investment. Modern anti-fraud methods bypass check transactions entirely.
Positive Pay is a cash management service used by banks to detect and prevent fraudulent check transactions. The service is based on regular communication between the company that issues the checks and the banks that handle them. When checks are cut, the issuing company sends electronic files of the checks to the bank. Electronic files include pertinent check information, such as monetary amounts and check numbers. These files are compared to the checks brought to the bank. If the numbers do not line up, the check is bounced and the company is notified that no transaction occurred. It’s important to note that businesses typically have to pay banks for this service.
Positive pay is generally considered one of the most effective anti-fraud banking tools. However, it is not fallible. Skilled fraudsters could, for example, forge check numbers and monetary amounts that match the electronic files provided by the issuing company. In such cases, fraudulent checks can pass inspection with flying colors and be honored.
Also, without constant vigilance, the system can lose its effectiveness. Numbers and files must be regularly updated and verified. That’s why many banks and companies find it worth the extra money to invest in a pay-positive software package. Software packages can help save time and ensure better record keeping.
Positive pay isn’t the only cash management service businesses use. Reverse positive pay, for example, is a cash management service whereby the company reviews check details instead of the bank. Using reverse payment, a bank sends the issuing company information about each check it receives. Reverse positive payout requires more company monitoring than other anti-fraud services and is therefore more prone to potential negligence and misuse. However, if well monitored, companies can save money by not having to pay banks for a positive payment service.
Banks tend to charge businesses for the use of these cash management services. Although potentially expensive, many companies find such services well worth the investment; The added protection against fraud can potentially save a business a great deal of money in the long run.
Modern anti-fraud methods bypass check transactions entirely, thereby eliminating the need for positive pay cash management systems. Many companies do this by paying employees via direct deposit, a system whereby money is electronically deposited directly into an employee’s bank account. Another method is to deposit money directly onto a special employee debit card. Such systems secure against fraudulent transactions, although they require additional cooperation from employees for maximum effectiveness.
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