What is Positive Pay?

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  • Written By: Matt Brady
  • Edited By: Jenn Walker
  • Last Modified Date: 13 September 2019
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Positive pay is a cash-management service used by banks to detect and prevent fraudulent check transactions. The service relies on regular communication between the company issuing checks and the banks handling them. When checks are cut, the company issuing them sends electronic files of the checks to the bank. The electronic files include pertinent check information, such as monetary amounts and check numbers. These files are then matched up against checks brought into the bank. If the numbers don’t align, the check is denied and the company is notified that no transaction occurred. It is important to note that companies normally must pay banks for this service.

Positive pay is generally considered to be one of the most effective anti-fraud banking tools. It isn't fallible, however. Skilled con artists could, for example, forge check numbers and monetary amounts that match up to the electronic files provided by the issuing company. In such cases, fraudulent checks might successfully pass inspection and be honored.

Furthermore, without constant vigilance the system can lose its effectiveness. Numbers and files must be up to date and routinely checked. This is why many banks and companies find it well worth the extra money to invest in a positive pay software package. Software packages can help save time and ensure better record keeping.


Positive pay isn't the only cash-management service that companies use. Reverse positive pay, for example, is a cash-management service whereby the company reviews check data rather than the bank. Using reverse pay, a bank sends the issuing company information about each check it receives. Reverse positive pay requires more monitoring on the part of the company than some other anti-fraud services, and is thus more prone to possible neglect and misuse. If monitored well, however, companies can save money by not having to pay banks for a positive pay service.

Banks tend to charge companies for the use of these cash-management services. Though potentially costly, many companies find such services well worth the investment; the added fraud protection can potentially save a company a great deal of money in the long run.

Modern anti-fraud methods bypass check transactions altogether, thus eliminating the need for positive pay cash-management systems. Many companies do this by paying employees by direct deposit, a system whereby money is electronically deposited directly into an employee's bank account. Another method is to directly deposit money onto a special employee payroll debit card. Such systems all but ensure against fraudulent transactions, although they require extra cooperation from employees to achieve maximum effectiveness.


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