When is reverse positive pay typically used?

Reverse positive pay is a fraud prevention tool used primarily in the check processing system. It is designed to protect businesses against unauthorized or fraudulent checks. In this system, the customer provides their bank with a list of checks they have issued, along with details such as the check number, amount, and date.

When checks are presented for payment, the bank compares them against the list provided by the customer. If a check does not match the details of any check on the list, the bank alerts the customer, who can then authorize or reject the payment based on their records. This approach gives the customer the ability to authorize each check presented, ensuring that only legitimate checks are paid out and reducing the risk of fraud.

This practice is especially relevant for businesses that issue a significant number of checks or are at a higher risk of fraud, as it provides an additional layer of security in managing their cash flow and protecting their financial assets.