Positive Pay is a banking feature designed to help business owners protect themselves against fraudulent checks being written on their account. You give your bank details for each check you write, then the bank verifies that your information matches the information on checks presented to the bank before it processes the payment. If any items do not match up, your bank flags them and sends them to you for review. You can then decide if you want to accept or decline the payment.
Here is a closer look at how Positive Pay works and why you may want to use it for your business.
Definition and Examples of Positive Pay
Positive Pay is an automatic cash-management tool that banks offer to business owners looking to minimize their exposure to check fraud.
Once you activate Positive Pay, your bank will begin validating any checks presented for payment from your account against the check data you gave the bank beforehand, such as the check number, issue date, account number, or dollar amount. If the information does not match, the bank flags the check and notifies you for examination.
How Does Positive Pay Work?
Positive Pay helps business owners safeguard their bank accounts against any losses by detecting suspicious transactions before they are processed.
For example, suppose Suzie uses First State Bank for her business banking and she is enrolled in Positive Pay,
Suzie gives First State Bank the check number, account number, and dollar amount for every check she writes. (She either enters this information manually in her banking portal or uploads a file.)
First State Bank validates any checks presented for payment against the information Suzie provides.
If the checks match, First State Bank processes the payments. If any of them do not match, First State Bank marks them as “exception items” and notifies Suzie.
Suzie then logs into her account, reviews the exceptions, and tells First State Bank if she wants to pay or return the items.