Positive Pay Prevents Fraud

Union State Bank's Positive Pay Service Prevents Over $280,000 in Check Fraud

Commercial check fraud has escalated into a significant threat targeting U.S. businesses. According to data reported in the 2024 Association for Financial Professionals (AFP) Payments Fraud Survey, 80% of organizations reported being victims of payments fraud, marking a 15-percentage increase from the previous year. Small businesses are particularly affected; nearly one-third reported falling victim to check fraud, and among those, 65% suffered losses exceeding $50,000.

“Check fraud has presented a significant challenge across the country for financial institutions and their customers, generating losses not only for the banks but also many of their commercial clients,” explains Stephanie Quiggle, Union State Bank’s Financial Crimes Manager. “Several commercial customers of Union State Bank have encountered issues with check fraud, including counterfeit and altered checks.”

The Financial Crimes Enforcement Network (FinCEN) highlighted that mail theft-related check fraud amounted to over $688 million in a recent six-month period, with an average reported loss of $44,774 per incident. The majority of companies still relied on checks for business payments in 2023, and 70% had no plans to discontinue their use within the next two years. This persistence underscores the urgent need for businesses to implement robust fraud prevention measures to safeguard against the evolving tactics of fraudsters.

In 2024, Union State Bank’s Positive Pay service prevented over $280,000 in commercial check fraud.

“Positive Pay is a fraud prevention tool designed to help businesses detect and stop unauthorized or altered checks before they are paid,” said Amber Groene, USB’s Director of Treasury Services.

Positive Pay reduces the risk of check fraud by ensuring that only checks that match the enrolled business’s pre-approved list are processed for payment. It has proven to be a valuable tool, particularly for businesses that issue a high volume of checks or issue checks for large dollar amounts.

“By implementing Positive Pay or similar check verification services, commercial customers can significantly mitigate the risk of check fraud and prevent potential losses,” Quiggle said. “These services streamline fraud monitoring for the commercial customer by comparing the check number, amount, and payee of each check issued to the same details of each check actually posting to the customers’ accounts. If there are any discrepancies, the Positive Pay service will notify the customer to review the specific item.”

According to the AFP survey, checks remain the most vulnerable payment method. Sixty-five percent of respondents indicated their organizations faced fraud attacks involving checks.

“There are so many different variables that can contribute to your account information falling into the wrong hands,” said Quiggle. “Once a fraudster obtains one of your checks, they have acquired your handwriting, signature, account number, routing information, and even the sequence of your checks. This enables fraudsters to produce hundreds of fraudulent checks based on just one check intercepted either through some part of the mail delivery process, stolen from home or office, or a previous payee not securing a check after it was negotiated.”

Quiggle believes that business owners can help protect their businesses from fraud through various preventive measures.

“Customers can lessen the number of check fraud opportunities by utilizing electronic payment types such as ACH or direct deposit; securing their checks and limiting access; checking their account transactions multiple times throughout the day or allow a product such as Positive Pay to do that for them,” Quiggle said.

Commercial customers interested in setting up the Positive Pay service should contact Union State Bank. Groene and the Treasury Services team are available to explain the steps required for service installation and daily use.

“Our Treasury Team supports customers using Positive Pay by assisting with setup, training users on how to upload check issue files, monitoring exception items, and helping resolve discrepancies to ensure accurate and secure check processing,” Groene said.