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by Steven Shafer and Sheila Dowling

Making payments is a core business function. Organizations work with a wide range of partners — such as printing companies, couriers, PR firms, parts makers and more — to support their day-to-day operations. Ensuring vendors get paid fully and on time is essential to maintaining healthy partnerships and a healthy business.

Unfortunately, this is also an area where fraud routinely gets in the way. In 2023, 80% of organizations were targets of either an actual or attempted payments fraud attack, which was up 15 percentage points from the prior year¹. Check fraud remains the most prevalent method, though ACH payments are also popular targets for fraudsters. No matter the type of attack, payments fraud can have significant financial and reputational impacts on companies.

As fraud activity continues to trend upward, it’s increasingly important for business leaders to fight back. One critical tool that should be in your toolkit is positive pay.

What is positive pay?

Positive pay is a service offered by many financial institutions that can help deter fraud by verifying key information before a payment is processed.

To utilize the service, a company first provides data to its banking partner. When it comes to checks, this can include information such as check numbers, dollar amounts and issued dates. Some positive pay solutions validate payee information as well to add another layer of security. Positive pay can also be used with ACH payments, with information such as dollar limits and authorized vendors being provided to a bank.

With this information in hand, a bank can then compare it against whatever comes in for processing. If a detail doesn’t match exactly, the bank will alert the company before completing the payment. For instance, a check comes in that appears to be from the business in question, but the check number isn’t on the list provided by the organization. This would trigger a positive pay red flag.

Putting positive pay to good use

In the previous example, the business would receive a prompt asking to approve or deny the payment. If company leaders believe that a forged check has been presented for payment, denying the request saves them from falling victim to fraud.

Positive pay services can include automation features, which allow businesses to establish exceptions and quickly process requests based on predefined criteria. Reporting is also often available, which gives business leaders visibility into their payments process and allows them to make informed decisions based on observed trends.

Businesses of all sizes and across industries should consider implementing positive pay to combat the rising threat of payments fraud. Reach out to an experienced treasury management team to learn more about positive pay, as well as other payables and receivables solutions that can help keep your operation secure.