Each year, organizations lose about 5% of their revenue to fraud, costing them hundreds of thousands of dollars — or more. From ACH fraud to identity theft, businesses face financial threats at almost every turn. While scammers have adopted more sophisticated techniques, financial institutions are fighting back with new tools to detect and deter fraud, such as Positive Pay.
Positive Pay is a fraud prevention service that financial institutions use to protect customers from check fraud and unauthorized ACH transactions.
Positive Pay works by verifying payments issued by a business before clearing them. When a business enrolled in positive pay writes checks, it presents a list of those authorized checks to the bank for reference (either daily or on specific payment days). The bank will then use the information provided by the customer to verify the payment when the recipient attempts to cash the check.
If the payment details match the check the business initially provided the bank, the payment will clear; if not, the bank will withhold the payment and notify the business of the discrepancy. The business can then decide to accept or reject the check in question.
Several types of Positive Pay exist, each offering a layer of financial security to small businesses. Understanding these options can help businesses choose the best fit for their needs.
Positive Pay for checks — also known as standard Positive Pay — focuses on preventing business fraud by comparing the details of paper checks issued by a business with checks that are cashed. If the two checks don’t match exactly, the payment is held for the business to verify if it’s legitimate.
There are two forms of Positive Pay for checks:
Seacoast Bank recommends Payee Positive Pay as it provides enhanced security by verifying the payee information, which is often the target of fraudulent alterations.
Often used in tandem with other types of Positive Pay, Payee Positive Pay introduces an additional security measure to prevent fraud. With Payee Positive Pay, the Positive Pay verification process includes cross-checking the recipient’s name with a list of recipients. This can help fight specific types of check fraud, such as check washing and check alteration.
ACH Positive Pay works similarly to standard Positive Pay but focuses on ACH payments instead of paper checks. The business provides its financial institution with a list of approved vendors and issued payments (and may include other filters, such as dollar limits), which are used to verify debits from the business’s account. If the financial institution detects any mismatch, it holds the payment for review.
Reverse Positive Pay is an alternative form of Positive Pay where the financial institution provides the business with a list of payments to review. With Reverse Positive Pay, the business has more oversight of the review process but is responsible for individual check verification. This approach is more time-consuming for the business, though it can offer greater control and additional peace of mind.
Positive Pay offers many benefits for small businesses, including:
To set up Positive Pay for your business, start by contacting your bank to enroll in the service. Once enrolled, you’ll need to provide the bank with a check-issue file either daily or on scheduled payment days. This file contains reference information — such as the amount, account number, check number and issue date — that the bank will use to verify each payment.
Introducing Positive Pay for businesses with existing accounting and payment systems may be challenging and could lead to some compatibility issues that require additional technical support or customization. For example, integration with accounting software might interfere with Positive Pay if the bank requires you to submit data in a certain format that differs from your current process. To ensure your data is compatible with the bank’s Positive Pay service, it’s helpful to create a process for generating and submitting the issue file.
Positive Pay protects businesses from fraud by flagging irregularities between checks issued by your business and checks presented for payment. To resolve any discrepancies, you’ll have to manually review each payment and choose to accept or reject it. This process can be time-consuming, particularly if there are frequent mismatches or errors.
Positive Pay is only effective if employees are trained on how to use it, including submitting check-issue files, managing exceptions and addressing any issues that might arise. To ensure your business is protected, it’s important to provide initial and ongoing employee training.
Positive Pay is one of many valuable tools that can play an important role in every business’s fraud prevention arsenal. To protect your business against fraud, consider pairing Positive Pay with additional fraud prevention methods, including:
Read more about how to protect your business from fraud.
Seacoast Bank safeguards your business from financial fraud with a range of fraud prevention tools and an expert customer support team that cares. From checks and ACH payments to Payee and Reverse Positive Pay, Seacoast’s Positive Pay solutions are customized to your business’s needs and preferences, and seamlessly integrate with your existing accounting software. With Positive Pay from Seacoast, you can protect your business from threats before they happen and take control of your financial security.
Take the next step to prevent your business from financial fraud. Speak with your local Seacoast banker to enroll in Seacoast’s Positive Pay service. Visit your local branch today or simply fill out the form below.
Topics: Protect Your Assets
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