National Check Professional (NCP) Certification Practice Test

What is the purpose of positive pay?

1. To reduce the number of checks issued

2. To automatically match each presented check against a list of issued checks

3. To identify fraudulent checks at the end of the business day

4. To allow customers to dispute checks after clearing

The correct answer is: To automatically match each presented check against a list of issued checks

The purpose of positive pay is to automatically match each presented check against a list of issued checks. This process is a crucial fraud prevention tool used by businesses to safeguard against check fraud. When a company issues checks, it provides a list of those checks to its bank. When checks are presented for payment, the bank can then compare them to the list of authorized checks. If a check appears that does not match the list, it raises an alert, allowing the bank or the company to take further action, such as contacting the issuer to confirm whether the check is legitimate. This proactive method significantly reduces the risk of fraudulent checks being processed because any discrepancies can be addressed before payment is made. Thus, the automated matching ensures that only checks that have been authenticated and correctly issued are honored, protecting the company's financial interests.