What is positive pay, and how does it help prevent check fraud?

Even in our increasingly digital world, check fraud remains a risk for businesses. In fact, according to the 2025 AFP Payments Fraud and Control Survey Report, 63% of respondents said their organizations experienced check fraud in 2024.

The best defense is a proactive approach using positive pay. Positive pay is a must-have tool for businesses looking to protect themselves from check fraud. Matching check details with the bank before payment helps catch fraud early.

In this article, we break down what positive pay is, how it works, different variations, the costs, pros and cons, and whether it’s right for your business.

What is positive pay?

Positive pay is a fraud prevention system that protects businesses from unauthorized transactions by verifying payment details before processing. This system works by cross-checking checks or ACH transactions against a list of approved payments your business provides.

The primary purpose of positive pay is to prevent check fraud by verifying that the issued check details match those presented for payment. If there are any discrepancies, like mismatched amounts or unlisted check numbers, the bank flags the transaction for review, helping businesses avoid costly errors or fraud.

As an example, imagine you're issuing payroll checks. Your business provides its financial institution with a list of check numbers, issue dates, amounts, and payee names. When an employee deposits their check, the bank matches the details with the list. If everything aligns, the check is cleared; if not, the bank puts a hold on the transaction until you confirm or deny its validity.

Most banks offer positive pay systems as a fraud prevention tool for their business clients. When you enroll, you provide the bank with a positive pay file, which lists checks you issued to review against payments. Bank positive pay is the term for the comprehensive fraud prevention service that combines checks and ACH transactions.

How does positive pay work?

Positive pay operates as a multi-step fraud prevention system. Here’s how the process typically works:

1. Submit a file of check details: The business provides a file containing payment details—such as check numbers, dollar amounts, and payees—to the bank before processing transactions
2. Bank compares checks: The bank cross-references a presented payment with the approved positive pay file
3. Flag discrepancies: Any mismatched details, such as an altered amount or unknown check number, result in the transaction being flagged
4. Approve or reject: The business reviews flagged transactions. Approved checks clear, and rejected checks halt payment.

Positive pay requires businesses to submit accurate and timely transaction data. Most banks set deadlines for file submission, making it essential to stay organized. While there are fees for using positive pay, the fraud prevention benefits typically outweigh the costs.

Depending on the volume of checks and the level of data accuracy, this could involve a serious time investment. However, setting up the process with automation significantly streamlines the workflow.

Positive pay variations: Reverse positive pay and ACH positive pay

Positive pay offers tailored options to address different payment methods and fraud risks. Each option is designed to protect specific transaction types while streamlining verification. Other types of positive pay systems include:

• Reverse positive pay: The bank shares transaction data with the business for approval before processing payments
• ACH positive pay: Verifies ACH payment details to protect against unauthorized electronic transactions

Selecting the right type of positive pay depends on your business’s payment methods and operational needs. Often, combining multiple types of positive pay provides the most comprehensive fraud protection.

Here’s a closer look at reverse positive pay and ACH positive pay:

How reverse positive pay works

Reverse positive pay shifts the verification responsibility to the business and helps to protect against altered or counterfeit checks. The bank provides transaction details for review, and the business must approve or reject each check before the bank will process them. While this method offers full control, it can be time-intensive if you don't use an automation tool.

How ACH positive pay works

ACH positive pay adds a layer of security to electronic payments by verifying details such as account numbers, amounts, and pre-approved criteria for ACH payments. This helps businesses protect against unauthorized or altered electronic transfers, which fraudsters increasingly target.

Fees and costs

The costs to use a positive pay system vary by bank and business size, but there are a few typical fee structures:

• Monthly fees: The most common fee structure is generally $25–$100 per month for positive pay services
• Per-transaction fees/review charges: Some banks charge per check or transaction reviewed for discrepancies
• Setup costs: Banks often charge a one-time setup fee when getting started with a positive pay system
• Data transmission fees: Some banks charge for every data transmission, especially when data is coming in a non-standard format

These charges can add up over time, so weigh the ROI when deciding whether positive pay is right for your business. How much are you paying for peace of mind versus what you stand to lose via potential fraud charges?

Many banks offer bundled business banking pricing as part of a larger fraud-protection package, or discounts for large clients with significant volume.

Advantages and disadvantages

Positive pay systems offer valuable fraud detection, but they’re not without challenges. Let’s review the advantages and disadvantages:

Advantages

• Fraud protection: Positive pay provides checks and balances to catch fraud, leaving you with peace of mind
• Automated verification: Automated verification reduces manual check review, saving you time and money
• Streamlined reconciliation: Positive pay may also streamline your reconciliation process and reduce financial losses

Disadvantages

• Costs: Positive pay services typically involve bank fees that vary by transaction volume and system complexity. Larger businesses can often negotiate lower rates, while smaller ones may feel the impact more significantly.
• Administrative overhead: Manual or automated file submission can add administrative overhead
• Time investment: Regularly submitting transaction data and reviewing flagged payments can become time-consuming without automation

Who should use positive pay systems?

Positive pay systems are ideal for businesses seeking to minimize fraud risk and improve financial security. Organizations that issue frequent payments, whether by check or ACH, can benefit greatly from this added layer of protection.

High-volume payers, such as payroll-heavy businesses, government agencies, and enterprises with significant vendor transactions, should strongly consider positive pay. But if you manage a small business, you may not think it’s as valuable.

Consider the following questions if you're deciding whether positive pay is right for you:

• Do you have a high volume of check payments?
• Is your industry vulnerable to fraud?
• Does your company have a history of fraudulent checks or transactions?
• Do you have the team in place to manage positive pay?
• Are the associated fees worth what you could potentially lose to fraud?

If you answered yes to these questions, it’s time to consider a positive pay service.

Stay in control of all your payments with Ramp

While positive pay systems help safeguard your check payments, they may still leave gaps in fraud prevention. Ramp’s all-in-one finance automation software offers additional security measures to protect all aspects of your accounts payable process.

From virtual card technology to multi-layered fraud prevention protocols, Ramp delivers tools that ensure your business stays secure and in control. Here’s how:

• Virtual cards: Shield your real card details during transactions and reduce fraud risks for sensitive vendor payments and international transfers
• Merchant restrictions: Block unapproved vendors, limit card usage to specific suppliers, and enforce category controls to prevent unauthorized checks and purchases
• Multi-layered security protocols: Protect your data with encryption-in-transit and tokenization, coupled with real-time fraud monitoring and alerts

Ramp’s commitment to secure financial management extends to its Bill Pay solution. Stay in control with Ramp—all from one intuitive platform.