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Definition
Positive Pay is a fraud prevention service offered by banks to detect and prevent check fraud. It works by matching the checks a company issues with those presented for payment. The business provides the bank with a list of checks it has issued, and the bank verifies each check against this list before processing the payment.

Why it matters
Positive Pay significantly reduces the risk of financial loss due to fraudulent or altered checks. By flagging discrepancies before checks are cashed, businesses gain tighter control over their disbursements and improve their overall security posture. This also helps banks identify potential fraud attempts early, allowing for quicker response and investigation.

Example use case
A company uploads a daily file to its bank listing all issued checks, including check numbers, dates, and amounts. When a check is presented for payment, the bank cross-references the information. If a check does not match the list, the bank flags it for the company’s review before proceeding, helping prevent unauthorized payments.