What is FedNow and the Difference Between Push and Pull Payments
Will FedNow transform the way MSPs get paid? Not just yet. Push and pull payments are key concepts in payments.
Push vs. Pull Payments
Generally speaking there are two types of payments transactions: push or pull payments.
1. Push Payments: as the name suggests, involve the sender initiating the transaction to "push" the funds directly to the recipient's account. When utilizing a push payment method, the sender typically authorizes the payment and triggers the transfer, enabling availability of funds to the recipient. Push payments are commonly used in scenarios such as e-commerce, peer-to-peer transfers, and business-to-business payments. Examples of push payments include checks and wire transfers.
2. Pull Payments: in contrast to push payments, pull payments involve the recipient initiating the transaction and "pulling" the funds from the sender's account. This method is typically used when the recipient requires authorization from the sender or when payments are made on a recurring basis. Pull payments often involve an agreement between the sender and the recipient, where the recipient has the authority to request funds from the sender's account, subject to pre-established terms. Pull payments are ideal for recurring bills or subscription-based services, as the recipient can initiate the transaction without relying on the sender’s active involvement.
What FedNow means for MSPs
The introduction of FedNow marks a significant milestone in the realm of real-time payments in the United States, especially considering advances in payments in other countries. Unfortunately when it comes to MSPs, one of the biggest keys to improving cash flow are pull payment methods that facilitate AutoPay. Because MSP billing is recurring in nature, relying on push payments means waiting on your clients to pay. Whereas with pull payments, an MSP can pull payment when due every month.
How FlexPoint can help
FlexPoint helps facilitate both push and pull payments, but emphasizes pull payments to improve cash flow. Our secure payment portal provides your clients an easy way to initiate push payments and also enables your clients to securely save payment methods for pull payments, including AutoPay- ensuring your invoices are paid on time, every time. Reach out to learn more on how we make payments simple and cash flow perfect.
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