Creativity and Entrepreneurship
Individuals who are creative love to do things differently. They seldom blindly follow what others have done in the past but believe in creating their own concepts and ideas. Creativity and entrepreneurship go hand in hand. Let us first go through a case study: John was working with ABC industries as sales executive. His role […]
Factors Involved While Deciding New Product or Service
Introducing a new product in the market requires meticulous planning and relevant ideas put together after several rounds of discussions and brainstorming sessions among employees associated with the organization. There are several factors which go a long way in deciding how and when a new product should be launched so that it is not only […]
The Ketan Parekh Scam
The Ketan Parekh scam was the second most important scam that rocked the Bombay Stock Exchange after the Harshad Mehta scam. To make matters worse, Ketan Parekh was himself a protege of Harshad Mehta and had learned stock trading from the pied piper of Bombay Stock Exchange himself. As a result, he was able to […]
The True Cost of Owning a Property
Home ownership is often considered by the layman as being a single expense i.e. the purchase price of the property. However, if we were to truly analyze the situation, home ownership consists of several expenses. It is easy to forget about some of the expenses while budgeting. Therefore in this article we have prepared a […]
Non-Profits: Global Justice
The previous articles in this module discussed the various aspects connected with the non-profits and how they link together with the overarching aims and objectives of ensuring social justice and equity. This article looks at the theme of global justice as it applies to the non-profits and how the goal of ensuring equitable growth and […]
As we have already seen in previous articles, corporations all over the world have started automating their payments. Unfortunately, a high degree of automation has also given rise to a high degree of financial fraud. This has created an opportunity for a commercial bank to provide a service to their corporate customers. This is where the concept of positive pay was born. Positive pay allows banks to completely remove the possibility of fraud from their payments process.
In this article, we will understand what positive pay is and how commercial banks help their customers avoid fraud using this methodology.
Positive Pay is a service provided by commercial banks to their corporate customers. This service pertains to the check payments being made by the customer. In most corporations, checks are not manually signed. Instead, they are printed via digital signatures. This also creates an opportunity for fraudsters to forge a check using these digital signatures. Positive pay provides an additional layer of authentication and hence helps eliminate the possibility of fraud.
As per the positive pay process, the corporation must send an electronic file to the bank enumerating the details of the check issued. As a result, the bank already has details of the genuine checks which have been issued. The bank will then match the details of this check with the ones being presented. The bank generally verifies the dollar amount, check number, account number, date, payee, and other details between the check and the file.
Only if these details match, is the check marked as “safe to pay” and paid. If there is any discrepancy between the details, the check is returned to the issuing corporation in the form of an exception list. In some genuine cases, checks in the exception list may be because of a technical error. In those cases, the issuer can ask the bank to honor the check. However, if a check is genuinely fraudulent, it gets caught in the positive pay process.
Positive pay is a double-checking mechanism wherein the responsibility of double-checking every check which is honored is undertaken by commercial banks. This service is very useful for large corporations that issue a large number of automated checks and need a system in place to prevent the issuance of any fraudulent checks.
Reverse positive way works just like the positive pay system. This means that the details of every check issued are supposed to be verified twice. However, the responsibility of checking and detecting fraudulent payments is passed on to the corporation.
In such a scenario, banks create a list of all the checks they have received in a day on behalf of the customer. This list is then passed on to the customer with details such as payee name, check number, amount, date, etc. The corporate customer then has the responsibility to compare this list with the actual checks issued by them and flag any fraudulent ones. This process is more time-consuming since banks have to wait to receive approval from the customer before they can actually process the payment on their behalf.
In some cases, it is possible to ask the bank to automatically honor or automatically decline the check if they do not receive the response within a certain amount of time. However, this can be a risky process.
The most commonly listed advantages of the positive pay process are as follows:
The positive pay process has certain disadvantages as well. These disadvantages need to be understood as well.
The positive pay process is a case study about how commercial banks are using simple technological innovations in order to simplify the process of check payments. This process is an example of a small but valuable service provided by the bank to its corporate partners in return for a small fee.
Your email address will not be published. Required fields are marked *
