How positive pay works and how to avoid pay fraud

Positive pay is an automated fraud detection system that most banks offer to their clients. The tool simply checks every account number, amount, and cheque number of every cheque that is presented for payment. Positive pay works based on a list that every company sends to the bank daily. This list contains all the details of every cheque that the company has issued. 

These details are – the cheque number, account number, dollar amount, issue date, and sometimes even the payee name. So, when a person goes to the bank to cash in a cheque, the bank already knows what should be written on that piece of paper. Therefore, thanks to positive pay information, cheque fraud is less likely.


How positive pay works
Positive pay works based on a list that every company sends to the bank daily.

Do you want to know how positive pay works?

Well, the cheque is checked by the bank. If they find an entry in their positive pay information that matches the cheque details, they pay the cheque upfront. If they cannot find the account number or cheque number on the list, they’ll contact the client’s company. The client also checks to see if they had issued such a cheque and lets the bank know. If the client finds there is no such cheque issued by them, then they instruct the bank to return the cheque.

It is a pretty simple system that’s been used for some time now, mostly because cheque fraud is so much easier than any other method.

So, if you’re wondering how much does positive system costs, you should know that now most banks offer this system for free. It used to be a paid tool, but not anymore.

Is positive pay worth it?

If your company still uses cheques, yes, it is very much worth it. There have been some infamous check fraud scandals over the year. Do you want to hear some?

Between 2004 and 2006, a Texas entrepreneur ran a cheque kiting scheme worth more than 1 million dollars. He basically wrote cheques for values greater than his account balances. Nevertheless, he did from multiple accounts and former companies’ accounts. This way, some cheques would serve to cover the non-existent funds in the first place. Only that all cheques were issued on non-existent funds. By the time the banks realized this, the man had withdrawn more than $1,6 million dollars.

The same cheque-kiting scheme happened in Cleveland, Ohio, United States, where three women withdrew more than $160,000 of the bank’s money, cashing in cheques at a local casino.

However, there have been causes of cheque fraud from inside the bank. Now, the positive pay file format does not offer much protection against that. In 2008, a CEO wrote more than $1.3 billion in bad cheques. That artificially inflated his company’s account balances.

So, cheque fraud happens. It is a thing, however, we hope it becomes a thing of the past, especially with all the new digital payment solutions that we have at the moment.

Is positive pay necessary? We think it is if your company is still dealing in cheques. You’ve seen all the fraud examples above. There’s nothing to stop people from doing it again and again.

How do you use it?

So, we’ve seen what positive pay is, and how it can help your company. Now, you probably want to know how to use positive pay. Well, most banks are now making the system mandatory for companies that are issuing cheques. Nevertheless, no matter the bank, you must have the option of activating the tool. You could do it digitally with most banks, from your home bank dashboard. There is a limit, however. Banks might impose a limit to make the system active. For example, if you issue cheques for more than $3,000 a month, then you can use the tool.


Nowadays, cheque issuers can electronically submit positive pay information to the banks. This information includes the date, name of the beneficiary, payee, and amount. Depending on the bank, you can do this via SMS, a mobile app, or internet banking. So, this is pretty much how positive pay works.

Another aspect you should consider is the security of your positive pay information. You are going to store this information digitally, on a machine. So, how do you secure it to make sure it is bulletproof? There are methods of securing these files. Microsoft has thought of one.


Positive pay pros and cons
You could do it digitally with most banks, from your home bank dashboard.

How to create a secure folder for positive pay information in Windows

  1. Open the folder or network location where you want to store the positive pay file format (D:\AX\PositivePay)
  2. Create a folder for the specific positive pay file (D:\AX\PositivePay\Out)
  3. Furthermore, create another folder for the XSL transform file (D:\AX\PositivePay\BankXSLT)
  4. Give write access for the D:\AX\PositivePay folder to Microsoft Dynamics AX Application Object Server (AOS). Don’t grant written access to anyone else.

Furthermore, you need to set up an outbound port for the positive pay files, and a batch job to generate these files. Moving right along, you can set up a number sequence for the positive pay files and assign a positive pay format to the bank accounts. From there on, you set up user security and you’re all set. You can follow all these instructions on the Microsoft dedicated page here.

Various accounting software services also offer the option to easily create and manage positive pay, like QuickBooks.

How to create a positive system file in QuickBooks

With QuickBooks, you can create positive pay files in your bank’s format, a full audit trail, and also have access to different exception reporting and research tools. You can activate the system directly from their app or from their online website. It offers possibly all the US bank formats for positive pay files, and connects directly to the Bank’s Positive Pay System, eliminating the need for exports and reports. You can find out more on their forum here.

Positive pay pros and cons

Well, positive pay is an anti-fraud automation tool that really works. Its main pro is that it helps you avoid cheque fraud. Its main cont would be that it is not bulletproof from internal threats. So, you need to be very careful how and where you store all the positive pay information. You also need to be wary of whom you give access to those files. This is a digital security domain, and you should invest in that.

Nevertheless, positive pay is not a bulletproof system that protects against any type of cheque fraud. You’ve seen our examples above. The best way to protect yourself against that is to stop issuing cheques and take up a more modern, digital way of paying, like Payoneer.

Positive pay vs reverse positive pay

Well, unlike positive pay, reverse positive Pay is a real-time checking process. The bank will submit all the cheques to their respective issuers. These companies will check all the details on the cheques and should give the bank an answer in 24 hours. If the issuer does not answer in this period, then the bank will release the funds nevertheless. So, as an end-user, cashing in a cheque within the reverse positive pay system might take longer.

Of course, here comes the question – which one is best – positive pay or reverse positive pay? The traditional positive pay system is more effective and efficient. If the cheques are on that list, boom- you release them. If not, you review them. So, you actually end up reviewing just a small portion, the exceptions. That could amount to 1% of all the cheques. We’d say it’s easier and faster.

Moreover, the reverse positive pay system has this default decision to release the payment if the issuer does not answer in a certain amount of time. That’s risky. Let’s say you didn’t have time or overlooked checking one $10,000 cheque. In 24 hours it is cashed in, and it could have been a forgery. Anyways, these are the only problems with positive pay.

It is the age of electronic payments. Why aren’t the cheques dead yet?

The idea of cheques has been around since the Roman Empire. The modern printed cheque as we know it today dates back to the 17th century. Therefore, in the age of electronic payment solutions, cheques seem very outdated. Positive pay works digitally nowadays, as you have seen. So, why can’t we make cheques go away and pay digitally in full, as well? There are options, apps, and platforms to do so. Nevertheless, some companies enjoy the feeling of control that cheques give them.

Paying with cheques makes gift purchases secret. Moreover, some customers are just not comfortable using the Internet to pay, so they prefer to order by telephone and pay by cheque. So, you see, there’s skepticism on each side, and we’re planning on removing some of that by presenting an easy-to-use online payment method. It will make your lives so much easier.

Positive pay works, but Payoneer is better

Payoneer is an excellent online payment provider. It is present in about 200 countries, so you can send and receive money from pretty much all over the world. It enables you to request payments from clients, and it also has a little custom invoice system. When it comes to payments between Payoneer accounts, there are no fees.


Nevertheless, Payoneer does have a couple of fees and they’re not always “motivating”, especially card transaction fees.

Nonetheless, Payoneer is a solid online payment provider that caters to businesses, freelancers, digital marketers, marketplaces, and professionals. There are about 4 million users on the platform at the moment. So that is something.


Positive pay vs revers positive pay
Payoneer is great for sending and receiving business payments across the world.

How can you use Payoneer?

We’ve seen how positive pay works. So, how can you make Payoneer work? Payoneer is a system that works best for freelancers and service providers. If you’re working on Fiverr or PeoplePerHour and collaborating with multiple clients, then Payoneer can help you with payments. You can request payments from your clients and even issue invoices from Payoneer.

Moreover, if you are a small business owner, you can use Payoneer to receive payments for your products and services. Furthermore, you can use Payoneer to pay your suppliers and providers.

Another category of business that Payoneer can help with is selling online. So, if you sell on online marketplaces, you can use Payoneer to receive payments for your products and services. Overall, Payoneer is great for sending and receiving business payments across the world.

What are Payoneer’s cons, then? There should be some. Well, there are. Unlike PayPal, Payoner is mostly focused on business. Sending and receiving money between your friends and family is not really Payoneer’s thing. Yes, you can issue a Payoneer prepaid debit card but there are some fees there that you might not like.

Payoneer has also got some limits for transactions. For payment requests,  there is a limit of $15,000 for credit card payments. As for receiving money from other Payoneer customers, you are capped at $100,000 per month with the basic account.

Nevertheless, you have quite a lot of room to run a successful business and get paid through Payoneer. It is safe, secure, and simple.

Payoneer offers support for multiple currencies

First of all, the Payoneer platform is very simple. You sign up and need to send some documents for verification. Afterward, the UI is fairly simple to navigate. From the first moment you register, you will see that you can work with a whole lot of currencies. The currency exchange rates are good, and the commissions are accessible.

With Payoneer, you can receive funds in two ways:

  1. When you send a payment request, your clients will receive an e-mail from Payoneer. In that e-mail, they’ll find the details of the payment you requested. They also have a couple of options to pay you. So, after they transfer the funds, they will appear in your Payoneer account within a few days, depending on the payment option they chose to use
  2. When you get paid by a marketplace, your Payoneer account works like a local bank account. This means, the money you receive is in your own currency and could be directed to your local bank.


As you can see, there are other ways to protect your payments than the positive pay system. Navigating the vagaries of the different financial systems and types of payments might be difficult. If you make a step wrong, it might cost you dearly.

So, choose only the services that you trust, read dozens of reviews if you can before deciding on Payoneer or other online payment platforms and make the best of your business.


1 thoughts on “How positive pay works and how to avoid pay fraud

  1. Pingback: Use Positive Pay to Reduce Which Fraud? All You Need to Know!

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