Positive Pay | What is Positive Pay? How Does it work?

In this post we will cover, what is positive pay in banking, how does positive pay work, positive pay checks vs. positive pay ACH, and whether positive pay is worth it?

As the rate of fraud incidents increases, covering the costs is becoming less financially sustainable for banks who are only liable for certain types of fraud like unauthorized transactions or identity theft (Source). As a result, many U.S. banks have become more restrictive in covering fraud losses, especially where B2B payments are concerned (. As this places businesses at more risk for fraud losses, implementing positive pay to protect vendor payments is more important than ever.

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What is Positive Pay in Banking?

Positive Pay is an automated system designed to stop fraudulent check or ACH payments from being processed. It is offered by the cash management department of most banks. A business creates a preapproved list of check or ACH payments, which the bank will be able to cross-reference to ensure only pre-approved payments are made.

What does ‘Positive Pay’ Mean? Why is it called that? It’s called positive pay because individual payments are either a ‘positive’ match to the preapproved list or a ‘negative’ match.

How does Positive Pay Work?

A business sends a file of approved check or ACH payments to the bank and the bank will verify any check payment requests against that file, flagging any discrepancies for review.

The bank will alert your business if they receive any checks not already approved in the Positive Pay file, including forgeries and stale checks.

If the bank discovers any exceptions it will generally send you an image of the check in question for you to verify and either approve or refuse payment.

Positive Pay File Format: The positive pay file format includes check numbers, account numbers, issue dates, and payment amounts. The exact format may vary depending on the bank.

What is a Positive Pay Exception?

A Positive Pay exception occurs when a check or ACH transaction presented for payment does not match the details provided by the account holder in their issued check file. Common reasons for a positive pay exception include:

• Mismatched check numbers
• Mismatched amounts
• Mismatched payees
• Unauthorized ACH debits

When an exception occurs, the bank alerts the account holder, who must review and decide whether to approve or reject the transaction before the deadline to prevent fraud.

What are the Applications of Positive Pay?

Positive Pay is primarily used for fraud prevention in financial transactions, especially where B2B check payments are concerned. Applications may include:

1. Check Fraud Prevention – Ensures that only authorized checks are processed by verifying details such as check number, amount, and payee against the issuer’s records.
2. ACH Fraud Prevention – Helps businesses control electronic payments by allowing them to review and approve or reject unauthorized ACH debits.
3. Corporate Cash Management – Assists businesses in maintaining financial security by reducing the risk of unauthorized or altered payments.
4. Vendor Payment Protection – Ensures that payments to vendors are legitimate and match issued instructions, reducing the risk of check tampering.
5. Payroll Security – Protects against fraudulent payroll checks by verifying issued payroll payments.
6. Government and Municipal Use – Used by government entities to prevent fraud in public fund disbursements.
7. Bank Reconciliation – Simplifies reconciliation processes by flagging discrepancies before transactions are finalized.

Positive Pay Checks vs. Positive Pay ACH

The difference between positive pay checks and positive pay ACH lies in the differences between the two payment types. Positive pay for checks search cross references a list of preapproved checks and flags mismatched entries in the form of exceptions. Positive pay for ACH, on the other hand, filters for unauthorized ACH payments based on a list of approved vendors/payees and authorized transaction types.

Related: Are ACH Payments Safe? How to Make ACH Safe

Key Differences:

Why Use Positive Pay? Is Positive Pay Worth It?

Positive Pay is worth it for most B2B applications. Businesses handling large volumes of check or ACH payments are especially likely to benefit from positive pay. Here are key factors to consider:

Benefits

• Fraud Prevention: Reduces check and ACH fraud by ensuring only authorized transactions are processed.
• Financial Security: Protects against altered, counterfeit, or unauthorized transactions.
• Control & Oversight: Businesses can review exceptions and decide whether to approve or reject them.
• Operational Efficiency: Automates fraud detection, reducing manual monitoring.
• Cost Savings: Helps avoid financial losses from fraudulent transactions, which may outweigh service fees.

Downsides:

• Service Fees: Banks may charge fees for Positive Pay, which could be costly for small businesses.
• Manual Review Required: Exception items require timely approval or rejection, adding an administrative burden.
• Limited Protection for Some Payments: While highly effective for checks, additional fraud controls may be needed for other payment types.

Who Benefits Most from Positive Pay?

• Mid-to-large businesses processing a high volume of checks or ACH transactions.
• Organizations vulnerable to check fraud, such as municipalities, nonprofits, and payroll departments.
• Companies with strict financial controls needing oversight on disbursements.

For businesses frequently targeted by fraud or issuing high-value checks, Positive Pay is absolutely worth the time and investment. Smaller businesses should weigh the costs against their fraud risk.

How Much Does Positive Pay Cost?

There is no set pricing model for or positive pay. The pricing structure and cost will vary by bank and whether you are paying by check or ACH. In general, you can expect to pay $25-$100 per month depending on volume and other factors. Here’s a breakdown:

Probable Positive Pay Pricing Models

1. Monthly Service Fee – Ranges from $25 to $100+ per month, depending on the bank and account type.
2. Per Item Fee – Some banks charge $0.01 to $2.00 per check or transaction reviewed.
3. Exception Decision Fee – Some banks charge $2 to $10 per exception item requiring review.
4. Bundled Pricing – Some banks offer Positive Pay as part of a treasury management package, which may include other fraud prevention tools.

Positive Pay Service with Fidesic

The Fidesic Accounts Payable Automation solution offers a positive pay service at no extra charge. Fidesic positive pay service supports the creation of the Positive Pay File for Microsoft D365 Business Central and Dynamics GP and automates delivery to the bank. By automating the process, Fidesic allows users to maximize the value of its positive pay service by reducing the added time and effort that Positive Pay may create. This allows you to move forward with peace of mind and efficiency. Learn more: JustPay with Automated Positive Pay

Conclusion

Checks account for 65% of payments fraud and are the payment type most vulnerable to fraud (Source). Positive pay is the safest way to pay by check. While it may be true that Positive Pay requires a bit more time and effort, it can save you time and money in the long run and reduce stress by giving you added assurance and security around check payments. It is also important in securing ACH payments. Key benefits include significant mitigation of risk, user friendliness and low cost.