Push payments are typically used for payroll direct deposits, mobile P2P services or wire transfers. Push payments also tend to be faster because payers send both payment and money, enabling quicker reconciliation. They must wait for checks to arrive in the mail, then wait an average of two days for them to clear - a process that can take up to 10 days, depending on the check’s value and other details. Slower payment methods, such as checks, can leave merchants in the dark for weeks. Suppliers know to avoid offering their services if transactions fail and receive money for their offerings if transactions go through. Their banks will decline the transactions should they miscalculate their available funds, sparing them from fees and informing suppliers about whether payments are genuinely forthcoming. The payer is in control of the timing, meaning he or she will make sure to have sufficient funds on hand when sending payments. Push payments do not carry the same risk and tend to be quicker. Account holders who do not have enough funds available at the time of withdrawal will be hit with painful fees, and the payee will be left uncompensated until it finds another way to bill its customers. There is a long timeline during which payees may call upon the funds, with banks being legally required to cash checks within six months of issuance - many will permit doing so long after that time frame. Account holders who provide authorization do not necessarily know when payees will withdraw the promised funds and may not remember to keep enough money in their accounts to cover the costs. Pull payments do carry risks for both merchants and payers, however. Consumers do not need to take manual action to complete these payments once transactions have been authorized, enabling providers to automatically withdraw funds from customers’ accounts. Pull payments are often used to support recurring purchases, such as subscriptions or utility bills. Payers provide PINs or signatures, which grant recipients permission to extract funds. This month’s Deep Dive explores how push payments speed transactions, as well as the benefits and potential challenges of their use in real-time payment systems.Ĭommon forms of pull payments include debit cards and paper checks. These methods have subtle distinctions as well as different advantages, risks and use cases. Push, or credit, transactions see payers instructing their banks to send money from their accounts to recipients’ accounts, whereas pull, or debit, transactions have recipients’ banks extract money from payers’ accounts. That consideration includes assessing the potential benefits and risks that come with the two fundamental types of bank payments: push and pull transactions. Consumers, businesses and governments are seeing faster payments as a path to greater convenience and financial security, and this growing demand is spurring payments services providers (PSPs) to meet this need in a swift, secure manner.
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