Last editedApr 20222 min read
With the rise of online and mobile transactions, consumers and businesses alike expect faster payments than ever before. Both pull and push payments have their place when it comes to speedy bank transfers, but both come with pros and cons. An authorised push payment puts the payer in control of when money is taken from his or her account – but there’s a downside to the payee. We’ll cover the potential disadvantages of push payments below.
What are push payments?
The terms ‘push’ and ‘pull’ refer to who instigates the movement of funds from a bank account.
Push payments: The payer is in control of the payment, giving instructions to send money to a payee.
Pull payments: The payee is in control of the payment, giving instructions to pull money from the payer’s account (with full payer consent).
While most frequently used for bank transactions, we could look at a few additional types of payments to see how this works. For example, cash would be considered a push payment. The payer physically reaches into his wallet and determines how much he will give to the payee. Bank transfers are also an example of push payments, with the sender giving instructions to the bank. The bank uses these instructions to push money from the sender’s account to the recipient’s account.
By contrast, Australia’sBECS Direct Debit system is an example of pull payments, with the payer giving the payee permission to pull money from the payer’s account. Once this permission is given, the payee takes control of payment timings and amounts.
Risks to sellers of authorised push payments
There are pros and cons to both systems. Push payments are faster than pull payments for the first transfer since they’re fully authorised with the initial request. However, this comes with added risk for the payee. Because control over payment is left in the hands of the payer, they can determine when and where to send the money. An incorrect email address or account number can cause delay, and there’s no guarantee that the payee will receive the money. Essentially, the payee must put full trust in the payer to initiate the payment when it’s due and in the correct amount.
What is push payment fraud?
Bank transfers and BECS Direct Debits both use multiple layers of security. However, there is always the risk of fraud when dealing with online and mobile payments. So, what is push payment fraud and how does it work?
Scammers might send a fraudulent invoice or give incorrect information about a payment’s destination. The payer’s then tricked into sending money to the wrong address. A fraudster might masquerade as the payer’s service provider, asking for payment for work that’s recently been performed. For example, imagine that you’ve just moved house. A scammer finds out about this via social media or public records and sends an invoice posing as your removal company. You send a push payment to the wrong account, only for the fraudster to disappear.
Authorised push payment fraud has increased both in Australia and worldwide in recent years, as digital payments grow in popularity.Within Australia, false billing scams resulted in the loss of AUD 18.4 million in 2020 alone, with a focus on automated payment channels like phone, SMS, and email. It’s a scam that young people are just as likely to fall for as older consumers, with 49% of losses attributed to payers aged 44 and under.
Alternatives to push payments
Whether you’re worried about the potential of push payment fraud or wish to take more control over the payments process, there are alternatives. When the payer must take action to instigate payment, the merchant is no longer in control. This can lead to late payments and eventual cash flow concerns.
By contrast, pull-based payment methods enable businesses to directly collect payment without delay. GoCardless offers a secure alternative and can be used for both recurring and one-off payments. It also integrates withaccounting partners like Xero to keep your finances in order – a more user-friendly and cost-effective experience for payer and payee alike.
We can help
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.