All You Need to Know About ACH Positive Pay

By Dan Miller · February 27, 2024 · 6 minute read

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All You Need to Know About ACH Positive Pay

The Automated Clearing House (ACH) system is a quick, simple, and secure way to transfer money between banks. However, online identity theft can still happen.

One way to mitigate the possibility of unauthorized electronic payments is to use an ACH positive pay service. Offered by banks and credit unions typically to businesses, ACH positive pay is a tool that allows you to manage and monitor transactions to ensure that only authorized payments will be paid from your accounts.

Read on to learn more about what ACH positive pay is, how it works, and its benefits.

What Is ACH Positive Pay?

ACH positive pay is a fraud prevention service offered by many banks and credit unions that allows businesses to control which ACH transactions are allowed to post to their accounts.

Also known as positive pay for ACH, the service typically allows you to set up a list of approved vendors that are paid automatically, along with the option to add filters, such as expiration dates and caps on the amount of money that can be paid to a particular company. You can add vendors to your approved list before an initial transaction to make sure the payment goes through.

Any transaction that fails to meet your parameters for payment will trigger an alert. You can then decide if you want to approve or deny the payment. This can go a long way toward preventing fraudulent transactions before they happen.

While banks typically charge for positive pay services, some institutions now offer it for free.

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How Does ACH Positive Pay Work?

The exact way that an ACH positive pay service works will vary depending on your financial institution. Generally, there are four key steps in the positive pay process.

1.    Authorization: A business provides its bank with a list of authorized ACH transactions, including details such as the transaction amount, originator ID, and effective date.

2.    Incoming transactions: When an ACH transaction is initiated, the bank checks the transaction details against the authorized list provided by the business.

3.    Decision: If the transaction details match an authorized transaction, the bank allows the transaction to proceed. If there is no match, the bank rejects the transaction and notifies the business.

4.    Notification: The business receives a notification of the rejected transaction and can review the details to determine if it is fraudulent. If it is legitimate, the business can authorize the transaction for future processing.

Recommended: ACH Transfer Limits: All You Need to Know

What Is Positive Pay For Checks?

Just like a positive pay for ACH system, many banks and credit unions offer businesses positive pay services for checks. The service works in a similar way but, rather than protect against fraudulent electronic transactions, it seeks to prevent check fraud.

With positive pay for checks, businesses provide their bank with a list of issued checks. The bank’s positive pay system then matches the date, check number, dollar amount, and account number of each check presented against that list to protect against forged, altered, and counterfeit checks. Checks that are considered suspicious are sent back to the issuer (you) for examination. This gives you the chance to examine and approve any questionable checks, reducing the chances that any fraudulent checks are processed.

Recommended: ACH vs Check: What Are the Differences?

What Is Reverse Positive Pay?

Reverse positive pay is a variation on the concept of check positive pay that gives the job of filtering check transactions to the business rather than bank.

With the reverse positive pay system, the bank provides the company with daily notifications about all presented checks and clears only those that are approved by the company.

If the company does not respond within a set period of time, the bank will typically go ahead and cash the check(s) in question. The reverse positive method is not as reliable and effective as positive pay, but generally costs less.

Recommended: Guide to Check Verification

Features and Benefits of ACH Positive Pay

Here’s a look at some of the benefits of setting up ACH positive pay for your business.

Security and Fraud Control

One of the biggest perks of ACH positive pay is increased security and fraud detection. You can set up several different blocks, filters, and alerts, such as:

•   ACH block This blocks all ACH transactions except for accounts that you specifically authorize.

•   ACH fraud filter This allows you to set up filters to control what activity is and is not automatically processed.

•   Activity alerts This allows you to monitor all activity or only receive alerts for potentially fraudulent transactions.

Flexible Notifications

While the details of ACH positive pay systems vary by financial institution, businesses can typically choose to receive notifications via email, SMS, or through their banking portal. This allows you to choose the communication method that works best for your business. Notifications can typically also be customized based on the type of transaction or alert.

Recommended: How Often Should You Monitor Your Checking Account?

Internal Control Support

Positive pay systems help businesses maintain internal controls by providing a clear audit trail of authorized transactions. This allows businesses to easily reconcile their accounts by comparing authorized transactions with their bank statements.

The Takeaway

Offered by many banks and credit unions, ACH positive pay can be a valuable tool for businesses looking to enhance their security and control over ACH transactions. By implementing ACH positive pay, you’ll be able to make decisions on unusual ACH transactions before the money is removed from your account.

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Can I reverse an ACH payment?

While ACH payments are generally non-reversible, there are a few exceptions. You may be able to reverse an ACH payment in one of these scenarios: the payment was for the wrong dollar amount, the account number provided was incorrect, the payment due date was incorrect, or there was a duplicate payment.

To reverse an ACH payment, you typically need to contact your bank or financial institution within 24 hours of the transaction and provide them with the necessary information, such as the transaction details and the reason for the reversal. You typically need to pay a fee to have an ACH payment reversed.

Is positive pay only for checks?

No, positive pay is not only for checks. While positive pay is commonly associated with check fraud prevention, there are positive pay services available for other types of transactions, including ACH transactions.

ACH positive pay allows businesses to control which ACH transactions are allowed to post to their accounts, similar to how positive pay works for checks. With ACH positive pay, businesses can provide their bank with a list of authorized ACH transactions, and the bank only processes transactions that match the list.

What is an ACH block?

An ACH block is a security feature offered by banks that allows businesses to block all ACH transactions from posting to their accounts, except for those explicitly authorized. With an ACH block in place, any ACH transaction that does not match the list of authorized transactions will be rejected by the bank.

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