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What Is ACH Positive Pay?

Online identity theft is an unfortunately common issue, so how do you know that your ACH payments are secure? Positive pay helps protect you from fraudulent payments. Learn the answers to what is ACH positive pay and how it works in our guide below.

ACH positive pay definition

Businesses use the Automated Clearing House (ACH) system to send and receive payments within the United States. ACH enables electronic bank-to-bank transfers such as direct deposit and vendor payments. To keep these types of payments secure, consider using ACH positive pay. The ACH positive pay definition refers to a service allowing users to review all incoming debits before they’re cleared for deposit in a bank account. With custom filters, you can choose to block suspicious ACH debits and credits until you’ve had a chance to authorize them.

How does ACH positive pay work?

When you sign up for an ACH positive pay service, your business creates a list of approved vendors. This should include anyone you send regular payments to. Listed vendors are cleared through positive pay to receive automatic payments, with filters including expiration dates and caps on the amount submitted in any single payment. If an electronic transaction takes place outside of this approved list, the system generates an alert allowing you to determine whether to approve the ACH transfer.

What is positive pay for checks?

Positive pay doesn’t only apply to ACH transfers; it is also used by banks as a tool to deter and prevent check fraud. Financial institutions can sign up for the automated positive pay service to ensure that issued checks match those used for payment. For example, the service ensures that each check lists the correct check number, account number, and dollar amount. If any checks don’t pass muster in the positive pay system, it’s returned to the issuer for further investigation. The customer will be notified with an exception report, and payment withheld until the company authorizes the check as valid or invalid.

Both check and ACH positive pay help safeguard against loss and liability. Some banks offer positive pay for free, while others will charge a limited fee to use this service.

What is reverse positive pay?

In addition to the types of positive pay mentioned above, you might see references to reverse positive pay. This is a variation on the usual system that requires the issuer to monitor checks or payments, rather than the bank.

Features and benefits of ACH positive pay

Before signing up for any ACH positive pay service, you should ensure that it includes the most useful features to protect your business. Here are some typical features to look for:

  • ACH block: An ACH block prevents unauthorized transactions by preventing them from posting to your bank account until approved. You can choose to block all incoming ACH debits, returning them automatically to the sender until you’ve manually approved them.

  • ACH fraud filter: Another key feature to look for is an ACH fraud filter, which is the list of transaction types permitted to automatically post. Businesses can add, delete, and modify the items on this list at any point through an online portal. Detailed tracking automatically flags fraudulent financial activity or suspicious payments, while also helping with financial reports.

  • Activity alerts: A third component to ACH positive pay is email alerting, ensuring you receive real-time updates regarding any account activity. Look for flexible notifications that can be sent via SMS text messages as well as email addresses, ensuring you don’t miss an important transaction.

Overall, tools like ACH positive pay offer an easy way to keep track of your incoming and outgoing ACH payments, for greater security and control of your finances.

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