What is positive pay

Positive pay is a fraud detection feature that most financial institutions offer as part of their cash management services. This anti-fraud tool operates as an additional security feature that provides companies with extra protection against altered checks and check fraud.

Positive pay explained

Financial institutions that specialize in cash management provide their customers the opportunity to utilize the account reconcilement services. These services refer to the balancing of a checkbook through an online portal in order to reduce error as well as increase efficiency for the customers. Large businesses are often subject to issue a number of checks throughout the month therefore it is important to monitor which checks have been and which have not been cleared.

In order to process the large amount of checks issued, banks provide the service of positive pay. Positive pay is an anti-fraud tool that prevents fraudulent checks being cashed.  For example, a company sends all their checks to their bank in order to be entered into the positive pay system. When the check is presented to the bank to be cashed, the details on the check will be matched with the details on the system. The check can only be cleared if the result is positive, that is, that the details match.

Positive pay is a tool that is specifically used by companies that issue check in order to make payments. It is required that the company shares their check register with their bank in order to ensure that all checks issued are cleared. The details that are used to clear checks include the check number, amount and the payee; these details need to match in order to clear a check from that company. Therefore, positive pay is a method that greatly reduces the risk of check fraud as all checks issued are registered with the bank.