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The Bank of Lithuania is rolling out an innovative SEPA Request to Pay (SRTP) service intended to simplify tax and contribution payments by enabling direct payment requests without the need for intermediaries.
This new system, developed in line with European SRTP standards, promises to reduce costs and streamline the payment process for public sector institutions, financial market participants and citizens.
"At the moment, there is an active discussion about the contributions and taxes collected by the public sector and the role of the payment intermediaries participating in this process, who receive income from the collection of contributions for the benefit of the state,” said Evaldas Ruzgys, director of the market infrastructure department at the Bank of Lithuania.
“The service we are developing allows us to do away with intermediaries, which makes the process both cheaper and simpler.”
With SRTP, institutions can request payments directly from individuals and organisations, cutting out traditional payment intermediaries.
By providing a one-time account number and giving consent to receive payment requests, customers can manage payment requests within their bank’s online system or mobile app, without needing to connect to additional systems.
Clients will be able to view, approve or reject payment requests directly within their bank’s interface, providing a smoother and more secure transaction experience.
The Bank of Lithuania has introduced this service to key national bodies, including the State Tax Inspectorate, the State Social Insurance Fund Board, the Customs Department and the State Digital Solutions Agency.
The next step will be consultations with commercial banks, where most Lithuanian citizens hold accounts, as well as other players in the payments market.
Speaking with Vixio, Ruzgys pointed out that similar initiatives have been launched in other countries, but have been struggling to attract potential consumers.
“In our case, the BoL is working with specific public sector institutions such as the tax inspectorate, customs, and others, not only to develop the product, but also to ensure that it is actually used.
“For this reason, we aim to offer not only the core functionality of the SRTP,” the regulatory official told Vixio.
“In line with the needs of the main potential customers, we are looking for additional functionalities that extend the core SRTP scheme and provide more options for its users. At this point we are not in a position to comment on the specification of the features.”
A long-term plan
Looking ahead, the Bank of Lithuania envisions expanding SRTP to connect with financial institutions across the EU, allowing payment requests to be sent to customers of any EU-based financial institution that supports the SRTP service.
As a concept, SRTP was first introduced by the standard-setting European Payments Council in 2021. It has experienced a slow market rollout, although some innovations have been beginning to take shape.
For example, earlier this year, retail banking giants in the EU such as Spain’s BBVA successfully completed the first pan-European proof of concept for R2P, EBA Clearing’s SRTP functionality.
As the Bank of Lithuania has suggested, the new functionality could cut costs and reduce reliance on intermediaries. However, as with all payments innovations, the central bank should be wary of the fact that take-up could be a slow burner.
Although SRTP could simplify payments in the long run, consumers may initially face a learning curve in understanding and managing direct payment requests within their banking apps.
The reliability of the infrastructure being developed could also be a problem. Direct payment requests place more responsibility on the Bank of Lithuania and public sector institutions to maintain a highly reliable and secure technological infrastructure.
Any technical failures or security breaches could have severe consequences for the state.
