While the payments industry continues to evolve, introducing ever more convenient methods of sending and receiving money, most transactions can still be divided into two core categories: push and pull payments. Push and pull payments facilitate millions of transactions around the world every day, giving businesses and consumers more control over their money. But what exactly are they?
In this article, we’re going to compare push vs pull payments, exploring the key differences between the two. We’ll also look at which applications they’re best suited for, so you can decide which one to use for your business.
Push payments rely on the payer actively sending or ‘pushing’ the money to another person or organisation. For businesses, this means requesting the payment and relying on the customer to send the money owed.
Push payments are typically used for transferring high value, one-off amounts. Since they give control of your incoming money to customers, they can easily lead to late payments that could affect your cash flow.
Examples of push payments
Push payments are those where the customer or payer has full control over the amount they are spending, the destination of the funds, and when the payment takes place. This includes:
Unlike push payments, pull payments allow businesses to withdraw or ‘pull’ money from payees, providing there is a pre-existing agreement between them. This makes managing and predicting cash flow much easier, there’s no reliance on the customers to make or remember payments.
Pull payments are particularly beneficial to companies that require recurring payments from customers, such as utility companies and businesses offering subscription-based or membership services.
Examples of pull payments
Pull payments are those that involve the payer or customer giving a business or another person permission to take money from their account. This includes:
Here’s a breakdown of some of the key differences between push payments and pull payments at a glance:
|
|
Push payments |
Pull payments |
|
Payment initiated by |
Payer |
Payee |
|
Supports recurring transactions |
No |
Yes |
|
Likelihood of late payments |
High |
Low |
|
Payment failure rate |
High |
Low |
|
Processing costs |
Higher |
Lower |
|
Best for |
One-off payments |
Recurring payments |
While many of the differences between push payments and pull payments present benefits to the payer and payee alike, there are also important considerations to bear in mind when making either type of payment. This may help you to decide which payment methods to offer to your customers.
Security measures
Push payments typically offer strong security measures, as the payer initiates the transaction. This often involves authentication steps like a one-time password (OTP) or biometric verification. However, there are still risks such as phishing attacks or malware that could lead to fraudulent or unauthorised transactions.
Pull payments involve the recipient initiating the transaction, which can introduce risks if their systems are compromised. To mitigate this, it’s crucial to make sure to have robust authentication and authorisation processes in place. Additionally, fraud detection systems can help to identify and prevent fraudulent pull payment requests.
Regulatory compliance
There are various different regulatory frameworks governing push payments across regions and industries, with standards like PSD2 (Payment Services Directive 2) in the UK aiming to enhance security and consumer protection. Compliance with these regulations is essential for businesses to operate legally and maintain trust with customers.
Similar regulatory standards apply to pull payments, with more emphasis on protecting consumers’ financial information and preventing fraud. Compliance requirements may vary based on the nature of the transactions and the entities involved, so it’s important to have a good knowledge of the relevant laws and guidelines for your business.
Implementation
Integrating push payment systems into existing infrastructure can be relatively straightforward, especially for standardised protocols like Faster Payments. However, businesses need to ensure compatibility with their existing software and systems, and invest in security measures to safeguard against fraud and data breaches.
Implementing pull payment systems may involve more complexity, as it requires integration with both sender and recipient systems. In particular, pull payments present challenges in ensuring transmission and authentication of data. When implementing pull payment systems, businesses should therefore prioritise cross-platform support that offers enhanced security.
Cost
Push payments often incur lower transaction fees compared to pull payments, particularly where businesses initiate the transactions. Additionally, the reduced risk of fraud associated with push payments can lead to lower overall costs in terms of security measures and fraud prevention.
Pull payments may involve higher transaction fees due to the additional security measures and risk management required to prevent fraud and unauthorised transactions. Businesses should consider these costs alongside the benefits of convenience and flexibility offered by pull payment systems.
User experience
Push payments offer a straightforward user experience, allowing the sender to initiate transactions quickly and securely. The control and visibility they have over their transactions contributes to higher satisfaction and trust in the payment process.
Pull payments can be convenient for users, especially for recurring payments where funds are automatically debited. However, some users may have concerns about security and privacy, particularly regarding the storage and transmission of their financial information. Offering transparent security measures and clear communication can help to alleviate these concerns and improve user experience.
Different payment methods have their own advantages and disadvantages, as well as applications that they’re more or less suitable for. This is why businesses choose to implement a variety of payment options, providing more versatility for themselves and their customers.
For companies wanting greater control and stability in their cash flow, as well as those offering regular or subscription-based services, pull payments such as Direct Debits are a great choice. However, that’s not to say that there’s no place for push payments in your business. Take a look at our article comparing Bacs payments vs bank transfers for more detail about how push and pull payments contribute to different types of bank transfers.
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