Payee Positive Pay Essential for Businesses That Still Use Checks
- The business world is tangling with “a startling resurgence in check fraud”
- Going digital has advantages- but many won't until they are victimized
- Implementing Payee Positive Pay service is essential
The Bottomline blog pulls no punches with the title of its latest entry, How to Beat Check Fraud: Go Digital, Get Positive Pay, or Get Swindled.
Blog editor Owen McDonald notes that the business world is facing a “startling resurgence in check fraud,” with a 385% increase reported in 2024. Further, he asserts – and we agree – that this alarming trend has caught many businesses off guard.
That’s a serious problem in business payments, as the ongoing reliance on paper checks can turn a $500 or $5,000 problem into a $500,000 nightmare.
The root causes are multifaceted. Rapid digitization of financial systems has paradoxically made paper checks more vulnerable, as fraudsters exploit weaknesses in physical check processing. Additionally, the persistence of paper checks in B2B transactions (40% of business payments) provides ample opportunities for criminals.
Why Businesses Continue to Use Paper Checks
Mr. McDonald provides a list of advantages for businesses switching to digital, including:
- Enhanced Security
- Faster Processing
- Improved Traceability
- Cost-Effectiveness
Yet, businesses still continue to rely on checks. But, why? Well, as we noted in a previous blog post, behavior may be the explanation:
Behavior is a major reason why, despite their high costs and inefficiencies, checks remains the preferred payment method for a portion of individuals and 75% of organizations. Asking individuals and businesses to change their behavior -- how they pay for goods and services -- is extremely difficult. And, even if electronic payments may provide more benefits like cost and time savings, this is the process many individuals and businesses have using for decades and they are unlikely to change.
To protect against check fraud, businesses must take a multi-pronged approach. Transitioning to digital payment methods like ACH transfers and virtual cards is the most effective long-term solution, offering enhanced security, faster processing, improved traceability, and cost savings.
For those businesses who want to use checks, there are several technologies that can stop fraudsters in their tracks.
Check Fraud Detection Technologies
As noted by Mr. McDonald, businesses that continue using checks need to implement Payee Positive Pay to protect themselves from alterations and counterfeits. This fraud detection system matches issued checks with those presented for payment, flagging any discrepancies for review. These fields include amount, serial number, date, and payee. However, Payee Positive Pay adoption has been surprisingly low, due to a lack of appreciation for the risk and perceived implementation difficulty. Unfortunately, many business do not take the threat seriously until they become victims.
In addition to Payee Positive Pay, financial institutions can further secure check payments by deploying complementary technologies, including transactional/behavioral analytics to monitor accounts, image forensic AI to analyze the images of checks, leverage consortiums to assess the risks of the check payment, and dark web monitoring to analyze accounts in danger.
With fraudsters leveraging more sophisticated technologies to perform their schemes, businesses and financial institutions must do the same to keep up.