Making the Case for Positive Pay
The Purposeful Banker welcomes Christine Held and Jessica Salerno from Bank of Ann Arbor to talk about why their bank is a strong proponent of positive pay to help business customers battle payments fraud and how it has shaped customer relationships.
Listen
Subscribe
Related Links
[2024 Datos Report] The Opportunity Your FI Is Missing by Not Effectively Selling Positive Pay
Transcript
Cheryl Brown
Hi, and welcome to The Purposeful Banker, the leading commercial banking podcast brought to you by Q2, where we discuss the big topics on the minds of today's best bankers. I'm Cheryl Brown. Welcome to the show.
Today, we have Christine Held and Jessica Salerno joining us on the show. Christine is the senior vice president of cash management for Bank of Ann Arbor, which is based, where else, but Ann Arbor, Michigan, and Jessica is the team lead for the bank's e-banking department. Christine and Jessica, welcome to the show.
Christine Held
Thanks for having us, Cheryl.
Jessica Salerno
Hi, Cheryl. Thank you.
Cheryl Brown
And since this is the first time on The Purposeful Banker for both of you, let's get to know you a little bit better. Christine, how about you go first? You've been at Bank of Ann Arbor since 2008, is that correct?
Christine Held
Yes, it is.
Cheryl Brown
OK. Tell us a little bit about the journey that led you to your current role.
Christine Held
So I started in banking as a private banker. I then transitioned to private banking, commercial lending. In 2001, I was fortunate enough to have the experience to start a de novo bank with a group of people, which was quite an experience and very interesting, and then we later sold that institution to a larger institution. When I joined Bank of Ann Arbor in 2008, this was a new role at Bank of Ann Arbor, so at that time, I was the entire treasury department and we only had 50 customers. Today, we're a department of 12 and our department sits in three separate locations, and we service thousands of accounts.
Cheryl Brown
Wow. Quite a bit of growth there.
Christine Held
Yes.
Cheryl Brown
Great. And Jessica, how about you? You've been at Bank of Ann Arbor a little over seven years, right?
Jessica Salerno
That's correct. I joined Bank of Ann Arbor in 2017 in the e-banking department. Currently, I'm an e-banking officer and fraud analyst. I oversee our customer service for online banking and mobile banking, as well as helping to educate and train our customers on fraud products like fraud prevention tools such as positive pay.
Cheryl Brown
Awesome. As you guys know, The Purposeful Banker, our audience is mainly commercial and small business. We're mostly focused on commercial and small business banking, so positive pay fits very nicely into that discussion. So tell me a little bit about Bank of Ann Arbor's approach to serving commercial and small business.
Christine Held
So as our tagline says on all of our marketing material, “Bank of Ann Arbor loves to help.” We're a community bank. We have 18 locations serving four counties in southeast Michigan. We have total assets of $3.3 billion, and then we have another just over $2 billion assets under management in our trust and investment department. We are a community bank, so we focus on small business banking. Our approach to banking is relationship-based. As a community bank, we strongly support the communities we serve, and it's one of the things that we take great pride in at Bank of Ann Arbor. We contribute to over 300 nonprofit organizations annually, and as a bank, since our inception, we have contributed over $8 million to nonprofit organizations.
Cheryl Brown
Wonderful, wonderful. So as all banks right now, but especially banks that serve commercial and small business, fraud is very top of mind. And that's not just for 2025, it's been this way for a while. A lot of financial institutions are looking for better ways to combat fraud, especially payments fraud. One approach, which is what we're here to talk about today, that's getting a lot of traction is positive pay. As a matter of fact, in 2024, Datos Insights put out a study that they worked with us on that shows a significant appetite among businesses to learn more about positive pay and put it into action. So we'll put a link to that study in the show notes for our listeners who want to read that, but I understand Bank of Ann Arbor has had some recent success with implementing positive pay with your customer base. When did you roll it out and how has it been received?
Jessica Salerno
That is correct, Cheryl. We've had a lot of success with positive pay, and I'm proud to say that Bank of Ann Arbor was an early adopter of positive pay. Bank of Ann Arbor had a homemade version in the early 2000s that was very manually operated by individuals within the organization. Upgraded in 2011 to a product offered by our core vendor, and then finally in 2019, we started using our current solution, which is Q2's ETMS positive pay, and through various upgrades, it's the system we've been on since then.
Cheryl Brown
So how have your customers received it?
Jessica Salerno
It's received very well by customers because a lot of Bank of Ann Arbor customers keep fraud at top of mind. Part of that, I think, is due to our organization's leadership being very interested in fraud prevention and giving us the tools to educate customers. We do monthly fraud seminars and send out newsletters, so we are engaging with customers about fraud. Once you give them that education, they're very excited to use positive pay and have that protection on their account.
Cheryl Brown
That's interesting because one other thing that that Datos paper that I just mentioned, one other thing that it showed is that a large percentage of small businesses, especially, just don't even know what it is, and the ones that do know what it is, they don't really know how to do it or how to use it. And then there are enough of them that just, they know what it is but they consider it a luxury and not a must-have. So you guys obviously are communicating with your customer base and helping them understand the value that it brings.
So how do you approach new customers regarding positive pay? Do you have a pay waiver, a decline to participate kind of requirement, or what's been your experience around that?
Christine Held
So in 2020, we started requiring all new business accounts to have positive pay or sign a positive pay waiver. Just last year, we changed our agreement to include a waiver by default. The reason that we did that was that we did find that customers, in order to avoid having to sign the waiver at account opening, they would sign the positive pay agreement and then never utilize the service. So with this new positive pay agreement we have, it allows us to have the waiver go into effect by default if a customer doesn't utilize positive pay within 30 days of account opening and signing the positive pay agreement.
And then we have a separate waiver that we use for those customers who decline positive pay at account opening. We also use that same separate waiver for our existing customers who decline the use of positive pay when we reach out to them and offer positive pay as a tool.
Cheryl Brown
So that's pretty much how you handle any objections that customers may have?
Christine Held
Well, it's very important for us to have our customers use positive pay rather than have them sign the waiver. So obviously, like you've indicated, customers have a lot of objections, a lot of hesitation, a lot of concerns about positive pay. So when they express those to us at account opening or our existing customers that we contact about positive pay during relationship reviews, what we do is we use a combination of real-life fraud experiences, we use statistical fraud trend information, as well as our vendor has a very robust demo site. So once we talk with customers about these experiences, about those fraud trends, and then show them the demo site, that usually helps alleviate a lot of those objections and concerns, which is, I think, in large part why our adoption rate of positive pay as opposed to a waiver is so high.
Cheryl Brown
Well, that leads right into my next question, which was how do you identify who the customers are who need positive pay? It sounds like pretty much all of your customers, you're recommending positive pay for.
Jessica Salerno
That is correct, we recommend it. I'd recommend it to a customer, a friend, a non-customer. I'm not a salesperson, Cheryl, but positive pay to me sells itself with proper education and training on what it is. Like Christine said, though, we discuss it with new customers at account opening, so if you're starting a relationship or opening up a new account at Bank of Ann Arbor, it's something that we'll talk about.
Cheryl Brown
So one thing that—again, I'm going to reference that Datos report because we just got so much good information from it—one thing that came to light is that so many banks give it away for free. Do you guys have a policy around that or how do you approach? Do you use it for non-interest income or do you just consider it something that you do for your customers?
Christine Held
So when we launched this new version of positive pay with Q2 ETMS, we decided that we did not want the pricing to be prohibitive, so if you compare our pricing to the pricing of other institutions, our pricing is very low. Because at Bank of Ann Arbor, we feel it's our responsibility to provide our customers with all of the tools to protect their accounts and protect their funds, so we did not want pricing to be an obstacle to adoption. So we do charge for it, but if that ends up being the only reason why a customer isn't going to utilize the service, we will waive it for a period of time, waive it permanently. It just depends on the circumstance.
Cheryl Brown
Have you had any customers that maybe you had a little more difficult time convincing them of the value and then they come back to you and they, "Oh, we get it now." Do you have any stories like that?
Jessica Salerno
We have had experiences where customers don't want positive pay or aren't interested when we first offer it to them. We would document that conversation to make sure that we know their preferences, maybe we don't ask them about it again. That way, we know that's their stance. Maybe we invite them to our fraud seminars, we keep sending them our monthly fraud newsletters, and then if we are in the unfortunate position where they then have an incident that positive pay could have assisted, we bring it up again at that time. And it's pretty tender when someone goes through an experience like that, but we try to let them know that positive pay would've helped them.
And if a customer is a victim of fraud, a counterfeit check, a fraudulent check, usually it's not just one. It starts with one, but then you end up seeing additional checks come through. If a customer goes through the trouble to order new checks and to open up a new bank account, they’d better get positive pay on that new one too, because unfortunately, the world that we live in, this is only a matter of time. So there have been situations where we circle right back around to that conversation after a fraud event.
Cheryl Brown
Right. So as a bank that has been employing positive pay from the beginning, I guess, of its invention—you had your own in-house solution—you have a lot of experience with it. So what lessons learned can you share for other financial institutions that may be considering whether to jump on board with it or maybe they're not quite sure whether it's worth the effort? What lessons learned can you share?
Jessica Salerno
I would, as a blanket statement, say positive pay is always worth it. If anybody would like to have a conversation about that, I could talk about it all day long. One of the things that you'll need is a vendor that also has a good positive pay solution or product for you. The vendors that offer positive pay need to have an up-to-date product. They need to make regular enhancements on that solution because the fraud landscape changes every day. The vendor needs to be focused on staying up to date with the trends and their product or their solution needs to be a full version of positive pay.
Q2's ETMS is for both check and ACH positive pay. There are available options that still just do one or the other. There are banks who are using two different vendors for positive pay so that they can have coverage on these transactions, but we have found that if you only have one positive pay solution, the fraudsters just figure it out and then do twice the amount of fraud on the other payment rail.
Cheryl Brown
Interesting.
Christine Held
In addition to what Jessica said about having an outstanding vendor and a very good solution, I believe that buy-in and support from all of the bank employees that come in direct contact with customers is extremely important, because customers trust the banker that they have a relationship with. That could be their commercial lender, their branch manager, trust officer or teller, and so by making positive pay an institutional priority, we've been able to enroll a significant percentage of our business accounts.
Cheryl Brown
How do you identify them? Are you doing a search among your data? How are you identifying those customers?
Jessica Salerno
Yes. We look for customers that are active check writers, whether that's a high volume of checks or maybe high dollar amount checks, and we also look for customers who have a large relationship with us based on how many accounts they have. The more accounts that someone has or the more checks that they write, the more transactions that need to be scrutinized for fraud, and positive pay is a great tool to help somebody do that, especially if it's a customer where their accounting department is one or two people, or if the business overall is only one or two people.
Cheryl Brown
So you are using the data that you have to really identify where you can make the most difference with positive pay.
Jessica Salerno
Absolutely, and prevent risk.
Christine Held
Positive pay is a large part of Bank of Ann Arbor's fraud prevention strategy, and we believe that offering positive pay along with other fraud prevention education and strategies is the best way to help our customers. Because losses from fraud are more than just a financial risk, they are a reputational risk as well, and we also believe that outstanding customer service is proactive. Like Jessica said, we reach out to our customers. We believe that good customer service is proactive and not reactive, along with the fact that we feel a responsibility, like I said earlier, to our customers to protect their accounts and their funds in any and every way possible.
Cheryl Brown
Great. Are there certain considerations that a financial institution needs to make before deciding to offer positive pay? What are some of the pitfalls?
Jessica Salerno
You need to be sure that you have the staff in place trained on using positive pay to support the customers that you're going to offer it to. Christine and I are very fortunate to be in a department of 12 people who like positive pay, who are ready to talk about positive pay, train our customers and do those setups. There's work involved on the back end, and our team is in place to support that.
You also have to be able to talk about the objections that customers may have. If a customer has an objection or a roadblock to using positive pay, banks need to be ready with an answer or a solution to that to keep the conversation going, and not to convince them but to really educate them on how easy it can be.
Cheryl Brown
Excellent. So parting notes. Anything else you guys would like to add about positive pay?
Christine Held
What I would say, and this is proven year over year, positive pay first and foremost protects our customers, but it also protects the bank, because in many instances of fraud, the bank takes a loss in some way, shape, or form. So the more customers that we have on positive pay, the fewer losses our customers will take, which means a lower percentage of losses that the institution will take. And the way we look at that is we look at how much was returned for the year by our customers in fraud and then we think about what the cost was, and in every instance, the amount of fraud that was returned exceeds the amount that it costs us to have this service.
Cheryl Brown
Well, thank you. You guys have both given us a lot to think about around positive pay and I appreciate both of you coming on the podcast today.
And that's it for another episode of The Purposeful Banker. If you want to catch more episodes, subscribe to the show wherever you like to listen to podcasts. As always, we'd love to hear what you think in the comments, and you can learn more about the company behind the content by visiting Q2.com. Until next time, this is Cheryl Brown and you've been listening to The Purposeful Banker.