5 Key Differences Between Positive Pay and Reverse Positive Pay

Businesses that want protection from scams and fraudulent checks always move toward Positive Pay and Reverse positive pay. But which one is more suitable for what type of business? If you are pondering this question, this post is the answer. 

In this guide, we will explore the options for your business based on their pros, cons, and usability to help you decide which one you should go for. Let’s start at the beginning. 

What Is Positive Pay?

Positive pay is a service where the bank cross-checks the details on the check with the details provided by the company to ensure that it’s correct and then proceeds with the payment. This helps companies to save themselves from fraudulent checks. The bank charges the company for this service as per every check or monthly fee. 

Here’s how it work: 

Check Issuance: The company issues the payment check for their vendor, writes the important details in their accounts book, and shares these details with their bank where the vendor is about to deposit the check. The details include information about the amount, check number, and the vendor’s name. 

Banking Process: Once the vendor reaches and deposits the check in the bank, the bank cross-checks the details with the info provided by the company. If the details match, the payment is processed. But if the details are incorrect, the bank will put the payment on hold.  

Review: If the payment has been stopped, the bank calls the company to make sure whether they have issued the check or it’s a fraud. Sometimes, the details on the check can be wrong. In order to avoid wrongful stop payment, the bank confirms with the company. The bank resumes the payment process if the company says the check was issued and is correct. But if the company denies it, the bank will stop the payment.

READ MORE How Positive Pay Works and Why Every Business Needs It

What Is Reverse Positive Pay?

Reverse positive pay is a type of positive that works in the complete opposite direction of positive pay. Here, the bank sends you (Company) the details to cross-check, and if all is well, you give them the thumbs up to proceed. 

Here’s how it works: 

Bank Sends You a List: When the bank receives a check issued for your account, they send you the list of checks or checks to you for confirmation. 

Reviewing the Checks: Once your firm receives the list, you have to check that all the details from the issued checks match the details of the check that has been recorded in your system. This includes the date, check number, the amount, and the payee’s name. 

Wrong Details: If you find any details that don’t match, you must contact the bank to hold the payment. You don’t have to do anything if the details are correct, and the bank will process the payment. 

Differences Between Positive Pay and Reverse Positive Pay

Both systems are excellent options for protecting your business from scams but have different working styles. To decide which style is more suitable for your business, here’s the breakdown of how both systems differ: 

Who Starts the Process?

For positive pay, the process starts with you. You issue the check to the vendor and then send the details to the bank for reference. On the other hand, in reverse positive pay, the process starts when the vendor deposits their check in the bank, then the bank sends the details to you to cross-check the details. 

When Do You Review the Checks?

For positive pay, the bank checks the details after you send the info, right after issuing the check. This gives you much time before the vendor deposits their check in the bank. For reverse positive pay, the bank sends you the check right after the vendor deposits it but before they process it. This gives you more flexibility but also means that you have less time to verify the details and get back to you if anything is wrong. 

How Much Control Do You Have?

Positive pay is a proactive approach where you have complete control. You can decide what checks are to get approved as soon as you make them. Reverse positive pay also gives you some control, but it requires your constant attention because you have to keep checking your emails to know when the bank sends the details or be prepared every time. Even if you are out, you can get a call from the bank for review. 

How Automated Is the Process?

Positive pay is a more automated system because the bank receives the details instantly and has much time before the vendor deposits the check. The bank’s system has enough time to register the details, so when the check arrives, the system can quickly check and verify the details. On the other hand, reverse positive pay is a manual process where the bank sends you the check details, and then you verify the details manually. 

Fraud Prevention Style

Positive pay is a proactive approach where the business takes preventive measures to avoid fraudulent activities. On the other hand, reverse positive pay is a reactive measure, where the bank sends the details as soon as they receive the check so you can verify if the check is valid and correct. 

Frequently Asked Questions (FAQs)

Final Statement

To summarize, positive pay is a proactive method that allows you to automate the process by taking preventative actions, such as sending the check details before the vendor reaches the bank. Meanwhile, reverse positive pay gives you more flexibility, where the banks contact you after they receive the check. 

The choice between them depends on the level of involvement you would like to be involved in the procedure. If you’re looking for an automated process and wish to avoid problems from the beginning, Positive Pay might be the best choice. If you’d prefer the option of reviewing each day and managing issues as they come, then Reverse Positive Pay might be more suitable.