Check-related frauds have been around since the inception of using checks for extending funds. Many individuals, businesses, and companies experienced fraudulent behavior such as check kiting and other forms of scams; because of this, most banking institutions’ Cash Management departments offer Positive Pay System. This automated tool’s main purpose is fraud detection and prevention. Knowing these things about Positive Pay can be utterly useful – let us tell you more.
Fraud Prevention with Positive Pay
Deterring fraudulent check-related behavior is imperative in everyday business. While most banks offer various methods of fraud prevention, Positive Pay is the most used cash managing service, re-examining problematic checks in a way that several parameters must match in order to complete transactions.
Namely, any check one presents in order to receive funds, must match a predetermined check number, account number, and the sum of money. If any of these do not match precisely, funds will not be extended.
Any company using Positive Pay service is obliged to provide files including copies of the checks that have been already issued to the bank every day. Each time a previously issued check is presented to the bank for collection of funds, a comparison is made with an electronic check copy provided by the company. Containing the account number, check number, the desired sum of money, the date of check issuing, and eventually the name of the payee, this copy minimizes room for error in each of these transactions.
Any check not having a match with the file provided becomes ‘an item of exception,’ meaning its issuing and overall money transfer completion need further examination. By sending the image of this item to the bank’s client, the bank confirms whether the check gets cashed or returned.
In most cases, banks charge for using this system, while some financial institutions tend to offer their clients the use of Positive Pay System free of charge.
What Is Reverse Positive Pay?
Reverse Positive Pay represents a distinction in the Positive Pay System concept. Fairly self-explanatory, this process works in reverse of standard Positive Pay.
As opposed from the bank’s confirmation through the company’s files, the financial institution of choice provides a listing of all checks due for payment. As the client compares check info, if the transaction is valid, the client will confirm to the bank that it is all right to extend the funds. Otherwise, if the check is proven to be invalid, the client is prevented from being exploited and the check cannot be cashed.
What Is ACH Positive Pay?
For ACH-based transactions, this system provides ACH Positive Pay services. Setting up this service allows implementing blocking and filtering parameters in order to establish maximum safety of these transactions. Filters specify which parties are allowed entries to prevent unexpected and unauthorized money transfers.
Blocking parameters allow modifying records of transactions online in real time. To learn more about this service, it is good to contact your banking institution and let them familiarize you with this service’s setup process.
In terms of check fraud prevention methods, Positive Pay is the most often used and trusted by its clients. Through several steps of issued check comparison, both the client and the financial institution ensure the transaction legitimacy prior to payment.
While standard positive pay relies on the client checking in with the bank for transaction confirmation, in reverse positive pay the confirmation order is switched. As this is a widely used service, it is good to bear in mind it also caters to ACH-based clients, through ACH Positive Pay.