One of the most commonly used ways that employers use to pay their worker’s salaries on a payday is through paper checks. However, playing employees’ salaries with paper checks does not go without its risks. This is because so many people tend to commit fraud by producing counterfeit identical checks and presenting them to Banks to collect money. This is where we need to know what positive pay is.
If you have not heard of positive pay before this article is going to do justice to it because we are going to tell you everything you need to know about it. I am going to show you how a positive thing works and how it is used by banks to prevent check fraud and others. If this is what you are interested in follow me as we go ahead and jump in.
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What is Positive Pay?
Positive pay is a security measure that is implemented when a bank is clearing paychecks for a particular company. Positive pay is to fish out fraudulent checks to make sure those types of yours checks are not paid or cleared so that the company does not lose money.
It is an automated cash management system that many banks make use of to detect check fraud.
The positive pay security measure simply matches the data on a check to the one that the company sent over to determine if the check is fake or real. If there are any details in the check that was provided or presented in the bank that does not match the original one sent by the company the check is not clear or paid out.
The data that needs to match includes the dollar amount, check number, and account number.
How Does Positive Pay Work?
The process in which the positive pay security measure works is similar to any other security measure. It is implemented by the bank which was directed by the company to secure their payment of checks to employees.
When an employee takes a check to the bank to get paid, the check is subjected to the positive pay security measure which now determines the data on the check if it matches the one that the company has already sent over.
These are the check data that are matched together to determine the authenticity of a check before it is paid, they are the Dollar amount, Check number, Date, and Account number.
When these all match with the one that the company has sent over to use for verification then the check is cleared or paid. In a case where there is a discrepancy, the check is sent back to the company for review.
But the bank can take various action if that occurs which includes Flagging the check, Notifying a company representative, or Seeking permission to clear the check from the company.
Benefits of Positive Pay
There is one single benefit of the positive pay security measure which is to simply act as insurance so that the company does not lose money to check fraud. If there were no positive pay protection so many fake checks which are so very well done that would be difficult to detect if are fake and would otherwise get paid which can lead to the company losing money.
If this continues it can lead to bankruptcy of the company and workers not getting paid. So most companies spend a lot of money to set up positive pay so that they don’t have to get defrauded and lose money.
Disadvantages of positive pay
There are also a few disadvantages of the positive pay system. One of the only disadvantages that we know of is the fact that companies might not send the complete list of checks to the bank to use in verification. When this is done those checks that are omitted when the company sends the list of checks to the bank will not get cleared.
Which can cause a delay for employees receiving their payday checks. However, this is an easy problem to sort out. Once the bank contacts the company. The company can correct this issue by sending the complete list of checks to be cleared by the positive pay system so that everyone gets their money.
This is a small price to pay in contrast to getting defrauded by check fraudsters.
How Much Does Positive Pay Cost?
Positive pay is one of the best things that has happened to companies that are still using paychecks to send payments to their employees. Most companies nowadays have switched to using payroll cards or direct deposit systems.
Although the cost of using the positive pay by the bank is not that much some bank has default positive pay system for some of their trusted banking partners.
Those who do not have the positive pay service for there are banking partners which are usually the companies, thay need to pay for this service. The amount per person for positive pay is usually $25 to $50. The Issued check fee (per check) is between 0 cents to 5 cents and finally, Payee matching fee (per item) is between 0 cents to 5 cents.
Positive Pay FAQs
How long does positive pay take?
The positive paid service does not take long to be active it usually takes up to 3 business days for a check to be cleared using it.
Do banks charge for Positive pay?
The positive pay fee is charged to the company that is making use of the positive pay insurance system for their company. It is not sure as to the customers all the employees that are giving the paychecks. There is a fee that was usually attached to using the positive pay but these days banks offer it for free or at a reduced fee to their banking partners.
How do I set up positive pay?
To set up positive pay all you need to do is simply go to the bank and indicate your interest. For that to be done you need to open a positive pay account from that bank with some cash then it will be active for you.
What is Wells Fargo Positive Pay?
Banks like Wells Fargo provide positive pay in default to their banking partners so they do not have to pay for the service. The answer to this question is yes wells Fargo bank makes use of the positive pay system to prevent fraudulent activities in checks.