Preventing Check Fraud with Positive Pay

Check fraud remains one of the most persistent and costly threats facing community banks and their business customers. According to Bank Director’s 2026 Risk Survey, 99% of respondents reported that their bank or its customers had been directly impacted by check fraud over the past 18 months. Additionally, the Association for Financial Professionals’ 2026 Payments Fraud and Control Survey found that 58% of businesses across a broad range of industries and sizes experienced check fraud in 2025, outpacing both ACH fraud and wire fraud. Despite the rapid growth of digital payment options, paper checks remain a primary fraud vector, and for community banks, Positive Pay is one of the most effective – if not underutilized – tools available to address it.

Understanding the Threat

Check fraud takes several forms, including counterfeit checks, altered amounts or payees, and forged signatures. Fraudsters have grown increasingly sophisticated, and the consequences for business customers can be severe. A recent alert from the Financial Crimes Enforcement Network flagged a significant rise in mail theft-related check fraud, underscoring that this is not an isolated or declining problem.

PRI Consultant and fraud expert Adam Brown sees a clear pattern driving the increase.

“I think about fraud like a balloon: squeeze it in one place, and the air has to go somewhere else. As the industry has done a better job combating card fraud through EMV and tap-to-pay technology, it makes sense that fraudsters are shifting their attention back to checks.”

The financial impact can add up quickly, and the window for intervention is often narrow. As Brown notes, “Even a relatively small check fraud case can represent a significant payday for a fraudster. It’s not uncommon for them to strike once or twice quickly and move on before anyone realizes what happened.”

How Positive Pay Works

Positive Pay is a straightforward but powerful fraud control. When a business issues checks, it submits a file to its bank detailing each check, including the number, amount, and payee. When those checks are presented for payment, the bank matches them against the submitted file. Any item that does not match is flagged as an exception and returned to the business for review before it clears.

Reverse Positive Pay works similarly but inverts the process. Rather than matching against a pre-submitted file, the bank sends the business a daily list of checks presented for payment. The business reviews the list and instructs the bank which items to pay and which to return. Both approaches give businesses meaningful visibility into their payment activity and provide banks with an important line of defense against fraud losses.

The Business Case for Offering Positive Pay

Offering Positive Pay is not just good for customers. It’s good for the bank, too. When a business customer falls victim to check fraud, the financial and reputational fallout can strain even long-standing banking relationships. Positive Pay reduces that exposure on both sides, and it positions the bank as a proactive partner rather than a reactive one.

Brown sees customer education as central to that partnership.

“Businesses often fall into routines with how they use checks because it’s simply the way they’ve always done things,” he said. “As bankers, our job is to educate them not just about the risks, but about the tools available to better protect themselves.”

Banks that make Positive Pay a standard part of their commercial and treasury offerings are better positioned to deepen customer relationships, demonstrate tangible value, and support their own risk management and audit readiness.

Overcoming Common Objections

Despite its effectiveness, Positive Pay adoption remains uneven across the industry. A few objections come up frequently, but none of them are insurmountable:

• Some banks assume their customers simply will not use it. In practice, adoption is largely a function of education. Customers who understand what Positive Pay does and what it protects them from are far more likely to enroll, particularly when the bank leads with a clear explanation and a straightforward onboarding process.
  
• Others cite operational complexity as a barrier. However, that concern was more valid before today’s digital environment. Modern core systems have made Positive Pay implementation significantly more manageable, and the operational lift is modest relative to the protection it provides.
  
• Perhaps the most common misconception is that certain customers are simply low-risk. Fraud does not discriminate by account size or customer profile, and smaller business accounts can be attractive targets precisely because they may have less rigorous internal controls. “Check fraud cases, particularly those below a certain dollar threshold, can be difficult to prioritize – let alone solve – at the law enforcement level,” Brown said. “That makes prevention all the more important, because recovery is not always a realistic outcome.”

What Banks Can Do Now

For community banks looking to strengthen their Positive Pay programs, a few practical steps can drive meaningful results. Bundling Positive Pay into treasury and cash management services, rather than positioning it as an optional add-on, increases visibility and makes it easier for customers to adopt. Proactive outreach to commercial accounts signals that the bank is paying attention and invested in its customers’ financial security. And front-line staff who can speak confidently about Positive Pay are the most effective channel for driving enrollment, making training and education an important part of any Positive Pay rollout.

Check fraud is not a problem that will resolve on its own. As fraudsters continue adapting their methods, community banks that take a proactive stance on payment fraud controls will be better positioned to protect their customers, strengthen their relationships and reduce their own risk exposure.

Our experts

Adam Brown is a dedicated payments professional with over 25 years of experience working across various areas of the payments business, nurturing strong client relationships and helping customers succeed. With a background in customer & franchise operations, law, fraud/risk products and overall account management, he brings practical insight and a steady approach to navigating complex solutions. 

Resources

Fraud Trends: 5 Common Tactics and How to Counter Them – PRI

Balancing Fraud Prevention and Profitability: Best Practices for Community Financial Institutions – PRI

2026 Risk Survey – Bank Director

2026 Payments Fraud and Control Survey Report – Association for Financial Professionals

Alert on Nationwide Surge in Mail Theft-Related Check Fraud Schemes Targeting the U.S. Mail – Financial Crimes Enforcement Network (FinCEN)

PRI specializes in identifying profitability improvement areas for financial institutions through revenue growth, cost control, streamlining processes, and effective use of technology. Contact us to learn more about our personalized approach to propel growth and improve profitability.