Payee

What Is a Payee?

A payee is the party that receives money in a payment transaction. The term appears most often on checks, where the payee is the person or company named on the "pay to the order of" line. It also applies to bills, wire transfers, bank bill-pay services, and loan documents, where the payee is the entity owed the funds or entitled to collect them.

The payee is the opposite of the payer, who sends the money. One person or business can be both at different times, such as when a company pays its suppliers and also collects payments from its customers.

How a Payee Is Identified

On a paper check, the payee's name must be written accurately, because the bank relies on it when deciding whether the check can be deposited or cashed. A payee can usually transfer rights to a check by signing the back, a step known as an endorsement. When a check is made out to a specific name, the funds are intended for that party or for someone they properly endorse it to.

In a promissory note, the payee is typically the lender, the party entitled to repayment. Such notes often allow the payee to sell or transfer the note to another party. This changes who collects the payments but does not change the borrower's obligation.

Why the Payee Matters

Because the payee determines where money goes, errors and fraud often involve the payee field. One common example is a check whose payee name has been altered or left blank so the funds can be redirected. Banks and businesses use controls such as positive pay services, which compare issued checks against the checks presented for payment, to catch mismatches.

For individual investors, the payee field is a useful place to start when reviewing a bank statement. Confirming that each payee matches a company or person you recognize and expected to pay is a simple way to notice unauthorized or unexpected transactions.