Enhancing Security With ACH Positive Pay For Businesses

Key takeaways

• Approve your regular payers in advance so ACH positive pay can flag and hold any debit that does not match your list.
• Compare ACH positive pay with an ACH debit block, and use them together when an account should rarely be debited.
• Budget about $20 to $50 per month for the service, far less than recovering funds from a single fraudulent debit.
• Review flagged payments daily and set a smart default decision so nothing clears without your approval.

What is ACH positive pay?

ACH positive pay is a bank fraud-control service that checks incoming ACH debits against your list of approved payers before they clear. It stops unauthorized or unexpected debits from posting to your account.

It builds on ACH payments, the Automated Clearing House network that moves money electronically between banks. Funds move through financial institutions that clear the bank-to-bank transactions.

ACH positive pay is a function that helps ensure the safest ACH payments and reduce the risk of fraud and unauthorized debits to your account. With positive pay, the business creates a list of vendors that they regularly pay. ACH payments to these approved vendors occur automatically. If a transaction occurs for a non-listed vendor, then the ACH positive pay system will send an alert and request authorization from the business to approve the payment.

Businesses can define positive pay settings to flag certain payments or to put a cap on the amount paid. This provides an added layer of security so that the chance of unexpected or incorrect payments is reduced.

ACH and check positive pay are based on a similar concept. Most commercial banks use positive pay for checks to prevent check fraud. Here’s how it works:

• Businesses provide their bank with a list of information about checks they issued and intended to be cleared from the account, including check number, date, amount, and bank account number.
• Before depositing the checks, the bank cross-checks each and compares it to the list.
• The checks that match up are cleared for deposit.
• Checks that have discrepancies or are not on the list are set aside, and the bank follows up with the business to verify the payment.

How ACH positive pay works

Now that we’ve covered the definitions of ACH positive pay, check positive pay, and reverse positive pay, let’s drill down into the step-by-step explanation of how ACH positive pay works:

1. Set up and authorization: The business signs up to the ACH positive pay service via its bank. During the setup process, the business specifies its approved vendor list and other criteria for authorized transactions, including amount limits.
2. Incoming ACH payments: ACH payments are presented to the bank. The bank compares each transaction against the pre-approved list provided by the business.
3. Matching transactions: The positive pay system checks the details of each incoming ACH payment against the authorization list. If a transaction matches the pre-approved list, it is automatically processed and paid.
4. Flagging unmatched payments: ACH payments that do not match up with the pre-approved list of vendors or payments are flagged, and the system alerts the business. Then, further investigation can determine whether to accept or reject the payment.

ACH positive pay vs. ACH debit block

ACH positive pay and ACH debit blocks both help stop unwanted debits, but they work differently. ACH positive pay reviews each incoming debit against your list of approved payers and flags anything that does not match, so you decide whether to pay or return it.

An ACH debit block is more of an on-off switch. It stops all ACH debits from hitting an account, or limits them to a short list of approved payers, without the same payment-by-payment review.

Positive pay gives you finer control and a clear record of decisions. A debit block is simpler and works well for accounts that should rarely, if ever, be debited. Many businesses use the two together.

Benefits of using ACH positive pay

ACH positive pay is a mostly automated process that enables businesses to maintain tighter control over payments and reduce the risk of unauthorized ACH transactions, without adding a lot of extra work to your plate. Let’s explore some specific benefits that come with ACH positive pay:

Implementing ACH positive pay

How can businesses implement ACH positive pay and get all the ACH advantages while ensuring security and efficiency of their vendor payments? Follow these steps:

Get set up with ACH positive pay:

Work with your bank to set up ACH positive pay. Configure the system to match your business’s requirements, including transaction limits and approved payees.

Integrate with online payment solution:

Make sure you have an online solution for ACH payments, like Melio. Then you can integrate positive pay with this software and start gaining the benefits.

Create your authorization list:

Create a list of approved vendors or payments and submit it to your bank. Make sure it is up to date by adding or removing vendors, or changing payment information, as needed.

Set payment limits:

You can increase your control of ACH payments by setting limits based on the type and size of payments. This helps to reduce the risk of large unauthorized transactions, which can put a real dent in your bank account.

Get your team on board:

ACH positive pay is an important tool that will save you stress and time, so make sure your team is in on it! Train relevant staff on how to manage ACH payments, approve vendors, and track positive pay notifications.

Monitor ACH payments:

There are no absolute shortcuts with fraud prevention. Keep an eye on incoming ACH payments and flagged transactions. Make sure to approve or reject questionable payments promptly, so it won’t disrupt your cash inflow.

ACH payments with Melio

Payment security is a top priority at Melio, so you can rest assured that your ACH transactions are safe and protected. The Melio platform is built with robust security technology, including state-of-the-art encryption and two-factor authentication, which means your account is always secure. Our data centers are fully SOC compliant with 24/7 monitoring, and we partner with the world’s leading and largest global banks so your business is never at risk

So, when paying with Melio, you don’t need to manage ACH positive pay yourself, as you can block any debit from your account except those from Melio. You also don’t need to share your bank details with your vendors and can pay them securely.

Want to get started with Melio, your online solution for ACH payments?

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