Winning the War Against Check Fraud

Why Is Positive Pay Necessary?

Written by Rich Love, CEO of AP Technology

Check fraud affects every bank in the nation, costing United States banks, businesses and individuals over 50 billion dollars a year. Processing over 200 million checks daily, banks have the responsibility to approve and transfer funds for these transactions as fast as possible, while at the same time protecting the depositor from the 1 million checks per day that are fraudulent. What will stop this number from increasing? Computer criminals armed with scanners, graphic software and check software have a high-tech arsenal of tools capable of re-creating the most sophisticated digital check images produced by any corporation. With the demand on resources of law enforcement agencies to prosecute violent crimes the U.S. General Accounting Office states that 75% of bank check fraud cases go unreported or unprosecuted.

A significant step in reducing check fraud losses was the creation of new laws in the form of the Uniform Commercial Codes (UCC). In 1990, revisions of the UCC introduced the concepts of comparative negligence and relative standards of care related to whether a bank or its customers would be liable for check fraud losses. The goal of this law is to make the banks and the disbursing corporations allies in the war against check fraud. Banks do not have to fight check fraud alone and always be liable for the check fraud losses that reflect directly to the bottom line.

. . . with a system this large and complex how do you develop a tool that prevents fraud and measures the potential losses, at the same time enabling your customer to join in the fight?

The challenge of guarding against check fraud is not new. The most successful solution for monitoring and stopping check fraud is the implementation of Positive Pay. This solution creates a computer or electronic file for each check the customers accounting system generates. This file is securely transferred to the bank where it can be matched to the actual check when it is presented for deposit or cashing. If the file is not a positive match, meaning the information is not exactly the same, the check is held for authorization from the company that is issuing the check. This positive pay system has been in use about 20 years (as of 2014) by large companies and banks that have been at risk due to size and volume of checks they write. Normally these systems are very expensive to implement and manage, due to the uniqueness of each customer's computer platform, individual accounting software, networks and the differences in banks Positive Pay formats. Because of these expenses and lack of standards, less than 5% of the commercial checking accounts have positive pay systems implemented.

. . . the needed solution is a Positive Pay system that is universally compatible to all types of accounting system software and computer platforms that does not cost tens of thousands of dollars. . .

Due to the uniqueness of each corporation's computer operating system, accounting packages (most custom programmed) and transmission protocols it has been impossible to develop universal banking and corporate standards for a solution like Positive Pay. Without standards it is expensive and time consuming to create a defense that can be implemented on a broad scale or measure loss prevention in a meaningful way.

After nearly two years in development, AP Technology Inc. of Carlsbad, California has introduced the de facto standard for Positive Pay and check fraud protection. Christened "SecurePay", this unique software product incorporates; quick implementation, user-friendly interface, unparalleled security, and completely automates the tasks. Creating the industries first and only universal positive pay solution. SecurePay is a Windows-software program that has the ability to interact with a multitude of platforms including Windows, Unix, AS/400, VAX, mainframes and others.

SecurePay's straightforward setup allows users to quickly and easily enter their specific bank account information into the program and also includes a library of popular bank positive pay formats that eliminate the need for individual Bank file configurations. By working directly with the Banks, AP Technology can ship SecurePay preconfigured for the customer and is flexible enough to modify a customers format if the Bank's Positive Pay specifications change.

As its name implies, a primary feature of SecurePay software is "security". The system is a true client/server application that is password-protected and can be accessed only by authorized users. For Windows applications the data for Positive Pay records are created while the checks are being printed. Users outside of the Windows environment use a module that automatically converts and encrypts check data from multiple formats. Data captured by the SecurePay system is automatically encrypted at the precise moment of capture and not deciphered until it is ready to be transmitted to the bank.

. . . AP Technology and their development of SecurePay software took the lead in developing a universal Positive Pay application for the masses. . .

Richard Love, the President and founder of AP Technology, Inc. took direct management control of the development of SecurePay. Mr. Love states, "We at AP Technology have always been concerned about the security implications concerning check writing." AP Technology pioneered integration of security features into MICR laser check printing systems with features such as audit trails embedded directly in the printer. "We have learned a great deal about the implementation of Positive Pay through our own work on our MICR check printing product SecureCheck. We integrated and supported its positive pay application for the past three years." Mr. Love further stated that, "One of the most difficult challenges has been to create one standard system that will work with database files, formatted flat files, text print files and/or PCL print files." AP Technology is a licensed Extended Solutions Provider with Hewlett Packard. Working closely with Hewlett Packard to develop secure printing applications for the financial industry, AP Technology learned how to create a secure application compatible with all of the different computer platforms and accounting systems.

. . . why create a solution when a proven Positive Pay application already exists with a corporation waiting to partner with you and your customer for immediate implementation. . . now!

AP Technology offers SecurePay directly to Banks for distribution, as well as offering the product to business customers directly.

SecurePay has completed pilot testing with many large U.S. banks whose customers are using many different platforms and accounting systems. SecurePay is installed in over 150 sites.

With SecurePay, the banks now have a standard system that creates the data records from any check-printing source, necessary to help banks monitor the validity of checks presented to the bank. Mr. Love notes that "the cost to implement SecurePay is less than the cost of the average loss due to a single check fraud incident ($1700). Until now, the banks and customers were at odds concerning how to implement anti-fraud defenses. With a standard universal tool such as SecurePay, that is economical enough for the small to large commercial companies, the bank and customer can be partners in the battle against check fraud. If the initial market reaction is any indication, SecurePay is exactly what the banking industry has been looking for.

For additional information on SecurePay contact:
AP Technology
6359 Paseo Del Lago
Carlsbad, CA 92009
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