What is reverse positive pay primarily used for?

Reverse positive pay is primarily used to enhance the security of cheque payments by authorizing each cheque before it is paid. In this process, the company provides the bank with a list of cheques that it has issued. When a cheque is presented for payment, the bank cross-references it against this list to confirm that it is an authorized cheque. If the cheque is on the list, it is paid; if not, it may be flagged for further investigation.

This method helps prevent fraud, as unauthorized or altered cheques are less likely to be accepted for payment, thus providing an additional layer of security compared to traditional positive pay, where the bank informs the company of discrepancies after the fact. The emphasis is on pre-authorization, allowing companies to actively manage and take control of their cheque payments, which is a significant advantage in reducing the risk of cheque fraud.