Pull vs. Push Payments: What's the difference?

Push and pull are commonly used terms for electronic bank account transfers. They describe the direction in which the money is moving and give context for who initiated the payment in the first place.

Knowing more about how they work and their uses for consumers today can help fintechs and other business leaders meet user demand and stay competitive in the crowded app space.  

What are push payments?

Push payments are payment transactions initiated by the sender of the funds (payer). This is how they work:

1. The payer initiates the payment by providing the amount, recipient (payee) and account details needed for the transfer. 
2. After authorization, the payment service provider or financial institution debits the payment funds from the payer’s account.
3. The payer’s financial institution sends funds to the payee’s financial institution.
4. The payee’s financial institution credits their account.
5. Both account holders receive confirmation of the completed transfer through account history updates, notifications or messaging services.  

Push payments can happen instantly or take one to three business days or more to process completely, depending on the service provider and transfer type. The payer can stop or change the transaction before it’s complete. 

What are pull payments?

Pull payments are transactions initiated by the receiver of the funds (payee) or the person or business being paid. Here’s how they work:

1. The payee receives authorization from the payer, including the bank account location (routing and account number) and amount, and creates a payment instruction with that information.
2. The payee initiates the payment by sending it to the payer’s bank directly or through a third-party payment service.
3. The payer’s bank debits the funds from the payer’s account.
4. The payer’s financial institution sends funds to the payee’s financial institution.
5. The payee’s financial institution credits their account.
6. Both account holders receive confirmation of the completed transfer through account history updates, notifications or messaging services.  

Pull payments can take one to three business days to fully settle, although some services support instant transfers within minutes. A customer can cancel them, but only by revoking the authorization with the bank making the pull. The cancellation must occur at least three days before the scheduled payment. 

Examples of push payments

Push payments are initiated by the payer from their bank accounts or connected services. They give control over when and how the payments are made. Examples include:

• Sending money from one checking account to another connected checking account at the same bank or an external financial institution
• Paying a friend or family member through their digital wallet (like PayPal or Apple Pay) to help with expenses or split a bill
• Using a peer-to-peer (P2P) service like CashApp or Venmo to send money for a gift or purchase
• A government entity using direct deposit to send a monthly child support payment or retirement benefit directly to a consumer’s bank account
• A fintech company paying out gig workers directly to their debit cards (push to card) for wages earned from a job

Examples of pull payments

Pull payments work by having the payee set up the transaction, but they still need the payer to provide their account information and consent. An example would be a customer visiting their electric company website to enter their checking account routing and account numbers and then agreeing to have money debited. While the payer needs to participate, the payee owns and controls the process and then initiates the payment on the agreed-upon date. The following are considered pull payments:

• Direct debits from a bank account for the electric bill, car payment, mortgage or tax payments
• Automated credit card payments for services like streaming video subscriptions, gym memberships or pet food delivery
• Automated Clearing House (ACH) debits used by businesses to fund payroll services so employees receive paychecks
• Digital wallets taking money from a connected bank account to pay for agreed-upon purchases

Benefits of push payments

Consumers and businesses enjoy using push payments to handle transactions traditionally initiated through paper checks.

Speed

Push payments can take several business days, depending on the financial institutions’ policies. However, this is still much faster than other payment options, like checks and money orders, which can take many days or weeks to obtain, send and finally clear. In some cases, push payments are complete within minutes, thanks to instant payment technology that reconciles the bank information in real-time. 

Security

Push payments give payers control over who and how they send money, and payments are handled according to the strict financial policies of the participating banks. RTP and FedNow are two types of payments that are push-only due to their security features.

Unlike more manual payment options like checks or money orders, push payments go through encryption and authentication processes that are less likely to be affected by fraud attempts. If the payer has any reservations about the payment, they can cancel it before processing.

Affordability

Electronic payment options, such as wire transfers, often have high fee structures, making them unaffordable for the average consumer to use regularly. Push payments may have fees, but they can be significantly lower, especially if the payer opts for the slower processing methods. With no postage fees, push payments also provide an economical option over sending money orders or checks through the quickest tracked or insured mail method. 

Convenience

Push payments occur instantly and can be initiated from a smartphone or computer — there is no need to visit a bank. These instant payments make it easy to split the dinner check or pay back a friend. They also provide 24-7 solutions, such as catching up on a rent bill any time of day or night — even on holidays or weekends. In this hyper-digital world where people need to handle tasks on the go, push payments help them manage their lives and maintain control over their finances. 

Benefits of pull payments

Pull payments also give payers more options for their personal and professional finances. They have similar benefits but slightly different applications, as they are used in recurring payment scenarios where giving the payee more control may be more beneficial.

Speed

Pull payments also take place within one to three business days, on average, but have the potential to be instant for those needing to access funds quickly. For example, vendors or wholesalers need a down payment to ship inventory, especially to new businesses. Pull payment authorizations for large down payments to secure inventory can help these new businesses transfer cash immediately and get products on the way with less delay than a check or payment initiated from the business.

Convenience

Organizations like the administrative efficiency of pull payments for business uses, such as invoicing and payment reconciliation, and some vendors, like wireless carriers may even offer discounts for recurring pull payment agreements. These payments work well in an automated financial system, which is becoming more common with modern bookkeeping and accounting tools. 

Reduced costs 

With automated payments set up to process ahead of time, consumers are less likely to experience late fees for forgetting to pay their bills. This saves customers money but allows businesses to collect payments more easily and without resorting to expensive collection practices to recoup funds.  

Businesses also save over time, since pull payments come with lower fees than most credit card processing services. This is why you’ll commonly see utility companies require customers to make online payments with a connected bank account and not accept card payments. 

Better cash flow planning

Organizations that use pull payments can anticipate a set amount of income coming in each payment period. This helps with cash flow reports and other big-picture business planning initiatives. Since pending pull payments can be viewed as short-term, collectible accounts receivable, they may increase a company’s value and be a good sign for investors. 

How Astra can help

Partnering with Astra for push or pull payments can offer several benefits to a company, enhancing their payment processes and overall financial operations. 

1. Faster payment processing allows companies to pay out customers, employees or vendors to connected debit cards in real-time using Astra’s instant payment API technology and a choice of payment rails. 
2. Seamless integration allows the embedding of payment tools directly into an existing app or website, eliminating the need for extensive app development or cumbersome payment processing contracts.
3. Astra’s flexible payment offerings support a flexible payment strategy to meet changing customer needs and scale quickly. From one-time payments to recurring subscriptions, Astra handles both push and pull payments behind the scenes.
4. A cost-efficient pricing strategy clearly outlines what companies pay for processing. Real-time payment fees provide a potential revenue stream to recoup costs and grow income.  

Astra has worked with businesses in the gig economy, the trucking industry, financial services, and beyond. However, any business that sends or receives payments can benefit from an upgraded payment experience, usually by embedding instant payments into its existing app experience. Request a demo to see our technology in action.