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The messaging function has been talked about for years, but other priorities have put it on the back-burner. Now, a new service from Iberpay and a proof of concept from EBA Clearing hopes to capitalise on the EU’s incoming instant payments regulation.
Request to Pay (R2P) has long been touted as a way to revolutionise bill and invoice payments, giving users greater control over the way they pay, and helping billers maintain a dialogue with their customers and reducing failed payment. Firms can also save time and money by improving reconciliation and invoicing.
However, the payments messaging service has so far struggled to take off in Europe.
"In the EU and the UK, Request To Pay hasn't been embedded yet, and I can see reasons for the lack of take up,” said Somya Patnaik, principal product manager at ACI Worldwide.
“For example, it is not in the EU's instant payments proposal, and there has been no aggressive push from regulators. It is not linked to any payment infrastructure or payment scheme, either."
Prioritisation is also a challenge, she added.
“So much is going on in EU payments, such as ISO adoption,” said Patnaik. “Some of these initiatives are pan-European and I can see why it is basically not top of the priority list.”
For Patnaik, banks are really struggling to make it a priority and need to have a clear focus on investment for this to work.
However, there are now projects happening which look to change this.
In June, Spain’s CaixaBank and Iberpay announced that they had become the first bank and infrastructure to get an approval certificate from the European Payments Council (EPC) to process transactions based on the SEPA Request-to-Pay scheme for its entities.
At the same time, EBA Clearing announced that, together with seven banks, they have kicked off preparations for a pan-European R2P proof of concept (PoC).
"If we go back a few years, the EBA Clearing community agreed to build R2P,” said Fredrik Tallqvist, regional representative for Finland and the Baltics at EBA Clearing. “This added an authorisation layer to the payment, and enabled R2P on a pan-European scale.”
Yet, Tallqvist pointed out that, since then, many regulation-driven projects have happened, including the ISO 20022 migration.
“This has meant that take off hasn't happened as the community expected,” he said. “However, we can now definitely see more take up and interest.”
With the ISO migration and other significant regulations behind them, payment service providers (PSPs) are now able to focus more resources on building out possible use cases that instant payments enable, including R2P.
Use cases
"The use cases that have been identified include e-invoicing, Point of Sale, e-commerce and peer-to-peer payments,” said Tallqvist.
Tallqvist continued that PSPs have invested quite heavily in innovative payment infrastructure, which they want to leverage for R2P use cases.
“In our PoC, we are focusing on e-invoicing in particular,” he said.
“E-invoicing offers a good first opportunity to demonstrate the business case of R2P for PSPs and their customers."
Cristina Lobo, director of internal rules and standardisation at Iberpay, told Vixio that R2P is “an ideal means of payment for any type of company that wants to facilitate the payment of the products it sells or the services it provides”.
Lobo cited “special and important benefits” for some use cases. This includes business-to-consumer payments, when contracting a service or purchasing a product, and for business-to-business payments, as well as those for payments to public authorities.
“The convenience, instantaneousness, and flexibility offered by Request to Pay contributes to a top-level payment experience for both businesses and their customers,” Lobo commented.
For example, companies can boost and streamline their invoice collection processes from their customers, sending them payment requests directly through digital channels, such as mobile applications or online platforms, receiving the final payment instantly and 24/7.
“For a long time, the European banking community has been preparing for the launch of Request to Pay,” said Lobo.
“It has been working on providing the EPC Scheme, a first European standard, with the essential features throughout its several versions.”
Lobo told Vixio that it is expected that the massive adoption of instant credit transfers via the new EU regulation will definitely enhance the instant payments experience with this essential complement.
“In the same way that traditional credit transfers are being displaced by instant credit transfers, with the arrival of Request to Pay a similar evolution is expected in the field of direct debits, since Request to Pay can be considered as an instant, digital debit, available 24/7, without the need to have a mandate,” said Lobo.
Could legislation be the missing ingredient after all?
In Brussels this autumn, the EU’s political institutions should finalise the instant payments regulation that they have been working on since October 2022.
Some lobbyists in the EU capital believe that the legislation could be timed to pass with the one-year anniversary of the European Commission proposing the legislation: October 26.
The proposal, which amends and modernises the 2012 SEPA regulation, includes making instant euro payments universally available, with an obligation on EU PSPs that already offer credit transfers in euro to also offer their instant version within a defined period.
It also requires PSPs to make instant euro payments affordable, with an obligation for the price charged for instant payments in euro to not exceed the price charged for traditional, non-instant credit transfers in euro.
“A good thing to come out of the future instant payments regulation is that there will be full coverage for instant payments,” said Tallqvist.
For Tallqvist, this will enable key R2P use cases.
“The future instant payments legislation will lead a migration from using ordinary credit transfers, settled one day after the processing, to instant credit transfers, processed and settled instantly,” said Lobo.
Lobo added that as of the regulation coming into force, instant transfers are expected to become the new normal in a matter of months.
“This will encourage PSPs to complement these instant credit transfers by using Request to Pay and this new scheme will have a promising future,” she said.
“It is expected that Request to Pay can become a powerful and efficient channel in the near future to initiate payments in real time by companies, businesses, organisations, administrations, banks, acquirers and invoice issuers.”
However, Lobo warned that “a massive adherence by PSPs” to the EPC’s scheme is also key here.
“Now it is time to create a solid network, otherwise it will not be possible to make it happen”, she said. “Reachability and interoperability are crucial for Request to Pay to successfully become a new way for making payments for final users.”
