Push vs. Pull Payments: What’s the Difference and When To Use Each

While the most basic difference between push vs. pull payments is who initiates the payment, there are other key differences as well. Each payment type carries unique benefits and drawbacks, so it’s important to understand which option makes sense for your transactional needs. Push payments tend to be more effective for one-time transactions and large purchases. In comparison, pull payments are ideal for recurring transactions and subscription payments.

To learn more about how push and pull transactions work in practice, read on.

TL;DR

• The main difference between push and pull transactions is who initiates the transaction. Push transactions are initiated by the sender. Meanwhile, pull transactions are initiated by the recipient. 
• As a merchant, you may use push and pull transactions with your customers and vendors.
• Push payments are more common for large or one-time purchases. They are also a popular option if the customer or merchant is paying a bill and initiating the transaction on their own.
• Pull payments are commonly used for card transactions and ACH debits. Even though a customer may be swiping the card or writing the check, it is ultimately the merchant who has to initiate the transaction.
• Because pull transactions are initiated by the recipient, the sender must provide authorization before merchants can process the transaction.
• Pull transactions are often more convenient for customers because they can set a payment schedule and forget about it. However, they carry a higher risk of chargebacks and reversals.
• Push transactions have a lower incidence of disputes, but they can be harder to reverse if there is a problem. If customers are inputting the recipient’s account number manually, there is also a chance that the payment will be sent to the wrong account.

Merchants generally need both payment models. At PayCompass, you can get help managing payments, authorizations, reversals, payouts, and reconciliation in a single portal.

Push vs. Pull Payments: What Is the Difference? 

At its core, the main difference between push vs. pull payments is whether the sender is sending money to you or whether you’re pulling it automatically from their account. If a customer sends a bank transfer or initiates the payment process, they are likely completing a push transaction. When you are “pulling” the transaction from the customer’s account with permission, it is a pull transaction.

As a general rule of thumb, you’re dealing with push payments if a customer initiates the payment. If you’re collecting the payment or it’s automatically removed from the customer’s account, it’s a pull payment.

What Are Push Payments?

To get a better understanding of how push vs. pull payments work, let’s take a closer look at who initiates the payment, how the money moves, and how this affects the transaction. Push payments are sent from the sender’s account to the recipient. For example, customers send push payments when they submit an online payment for a bill or transfer money on Venmo to a friend.

As a merchant, you may use push transactions when you pay for a vendor’s invoice or use a bank transfer to make a payment. Additionally, customer refunds are another common example of merchant-initiated push payments.

Who Initiates Push Payments?

Push payments are initiated by the sender. The sender could be the customer or the merchant. All that matters is that the person sending the money is also the person starting the transaction.

How Money Moves in a Push Payment

While each payment type varies slightly, push transactions follow a general payment processing flow.

1. The sender chooses the recipient and the amount that will be sent.
2. The sender authorizes the transaction.
3. Funds are sent from the sender’s account.
4. Depending on settlement timelines and other factors, the recipient will generally receive the funds several minutes to a few days later.

How This Affects the Transaction 

There are several key differences in how push transactions impact merchant control, risk levels, and the overall customer experience. With push transactions, the sender is in control of the payment. As a result, merchants have less control over when or if the payment will be made.

In exchange for less control, merchants can enjoy having slightly less risk. Unauthorized debits and chargebacks are less likely because the sender is initiating the transaction. However, these transactions can be harder to reverse than pull transactions. Additionally, there is a risk that the sender will input account numbers incorrectly and send the payment to the wrong account.

For the customer, push transactions tend to involve more effort because of the added steps involved. Customers also have to remember when bills are due, which can be inconvenient and lead to missed payments. 

What Are Pull Payments?

While both payment styles result in the merchant receiving payment, the person who initiates the transaction and payment flow is different. Additionally, pull payments involve a different level of merchant control and higher chargeback risk.

Who Initiates Pull Payments?

With pull transactions, the payment is initiated by the recipient. For instance, you may charge the customer’s card on file for a subscription.

It’s important to clear up a couple of common misconceptions about push and pull transactions. Check payments, credit card transactions, and debit card payments are often pull transactions. While the customer is physically filling out the check or swiping the card, the actual payment process is initiated by the merchant. When a card is swiped, the customer is authorizing the transaction to take place, but the actual money will be pulled when the merchant submits the transaction for settlement, and it clears through the payment network.

While the merchant is responsible for initiating the pull transaction, the customer must authorize it first. They may do this in different ways.

• One-time authorizations, such as swiping a card at a checkout counter
• Recurring payment authorizations through a saved card
• Signing a debit mandate for ACH debits

Once the authorization agreement is made, the merchant can process payments on the agreed-upon time schedule.

How Money Moves in a Pull Payment

Although the flow of money can vary, it always begins because the merchant or recipient initiates the process. The following is an example of how a pull transaction workflow functions in practice.

1. The customer provides their payment information and authorization to process payments.
2. The merchant initiates the recurring or one-time charge.
3. The payment network debits the customer’s account.
4. Funds are sent to the merchant if the debit is successful. Otherwise, the merchant is notified that the payment failed.

How This Affects the Transaction 

Using pull transactions impacts the merchant’s control of the transaction, the risk level involved, and the customer’s experience. Unlike push transactions, pull payments involve more control for the merchant. The merchant is responsible for initiating the payment and has control over the timing. Merchants are also able to retry failed payments.

However, this added control comes at a price. In general, pull transactions involve a higher level of risk. Because the merchant is initiating the transaction, there is an increased risk of chargebacks, disputes, and reversals. Additionally, the merchant faces added compliance rules for customer communication and storing proof of consent.

For most clients, pull transactions result in a better customer experience. They can set a payment schedule and forget about it. However, you may get complaints or reversals from customers who forget about scheduled charges. 

When Are Push vs. Pull Payments Used?

To give you a better idea of how push vs. pull payments work in practice, we’ve compiled a list of the most common scenarios where they may be used.

Scenario	When Push Payments Are Used	When Pull Payments Are Used
Retail Purchase	The customer sends a direct money transfer for a large purchase or instant transfer during the checkout process.	The merchant charges a saved credit or debit card after receiving checkout confirmation.
Subscriptions	The customer manually pays their subscription bill each cycle.	The merchant automatically collects the billed amount each cycle.
Rent or Utilities	On or before the due date, the tenant sends in their rent or utility payment. Often, this is done through a bank transfer or bill pay.	The landlord or utility provider automatically collects the payment from the tenant’s account.
Loan Payments	The borrower sends in an ACH, wire payment, or direct transfer when the bill is due.	To avoid late payments, the lender automatically debits the borrower’s account.
Fundraising	The donor decides to give money to a charity and wires money to the charity’s account.	A recurring payment is set up so that the charity can automatically pull money from the donor’s account each month.

When Should You Use Push or Pull Payments? 

To help you decide when to use push or pull payments, we’ve compiled a list of some of the key differentiators between each transaction type. If you need extra help, you can always reach out to our payment experts for a professional consultation about your payment processing options.

Push Payments	Pull Payments
Great for one-off payments and large transactions	Great for recurring transactions
Often used for physical goods	Often used for subscriptions or recurring transactions
Tends to have higher processing fees, although this largely depends on the rail involved	Tends to have lower processing fees, although this largely depends on the rail involved
Less likely to experience a chargeback or unauthorized debit	More likely to experience chargebacks, disputes, and reversals
Better for new or short-term customers	Better for long-term, loyal customers

Pull transactions require less effort by the customer and can create a predictable revenue stream for your business. They can reduce your cart abandonment rates and incur lower ACH transaction fees. However, there is a higher risk of chargebacks, and ACH payments can take several days to reach your merchant account.

With push payments, you can benefit from faster transaction speeds, fewer chargebacks, and a simpler process. Merchants can receive payments faster and have better visibility of the payment flow. When it comes to drawbacks, the added customer control can lead to payment delays. By not storing payment details, you may experience fewer repeat transactions. You’ll also spend more on processing fees.

How PayCompass Can Help You Manage Push and Pull Transactions

As a merchant, you will most likely need to use push and pull payments. With the help of PayCompass, you can run both payment models at the same time. Our team of payment experts understands the compliance and security needs involved in handling all types of transactions. We support card, ACH, and other payment solutions.

Through our portal, you can bring all payment methods together in a single, simple-to-manage location. You can easily manage and store customer authorizations for pull transactions. From payout scheduling to reconciling bank payments, we can help with all of your payment processing needs. We can discuss ways to reduce your collection costs, increase your rate of on-time collections, ensure more reliable payouts, and deliver a better customer experience.

Final Thoughts

Ultimately, deciding between push vs. pull payments isn’t about choosing which one is better. Each customer transaction and business is different, so you need flexible payment processing options that match your company’s unique needs. By using the right payment style for the situation, you can reduce friction and ensure the best customer experience possible.

Push payments are often the best choice if a customer is initiating a bank transfer for a large payment or if you want to pay your vendors. Pull payments are effective if you want a smoother customer experience, a consistent revenue stream, and on-time collections. However, a successful business will need to use both payment types.

By partnering with PayCompass, you can ensure a smooth, consistent payment stream. We can help you determine the right mix of payment types and help you manage them through a single portal.
For streamlined collection processes and easier payments, reach out to our team of payment processing experts today.