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After the “regulatory stimulus” to payments innovation that came with the revised Payment Services Directive (PSD2), financial institutions must be proactive in creating an environment for request to pay (RTP), experts have agreed.
The opportunities presented by RTP are now completely business-driven, said Christian Schäfer, payments chief at Deutsche Bank, speaking at the webinar "Staying In The Request To Pay Race".
“It is a progressing journey,” he said. “You have a lot of interest on the corporate side.”
Corporates see this as an alternative means of payment, he suggested, putting RTP in the same box as cards and other means.
“What is perceived on the corporate side as a very attractive solution that is cheaper than what is currently in the market, and comes with strong customer authentication, so is more secure,” he said.
RTP is a payment process that functions through a secure messaging framework.
Once it is rolled out in the EU and UK, it will allow businesses and individuals wishing to receive a payment to send an electronic request for it. This will include the amount and due date.
It effectively could allow businesses to have a two-way dialogue with customers as part of the payment process, potentially saving costs and time on phone calls and email messages chasing payments.
For example, RTP messaging services could offer help to those struggling financially by allowing them to ask for extensions, while also clarifying that they do intend to make the payment.
Experts have, so far, said that they expect it to be a game-changer for payments. However, stakeholders are not all on the same page.
Indeed, Schäfer pointed out that while many corporates are enthusiastic, there is also the question of whether there will be take up from consumers, who are needed for the RTP business model to work.
“In order to make this an attractive product in a two-sided market, there need to be incentives towards the retail customers,” he suggested.
This is a journey that needs to begin, Schäfer said.
“It is a combination of B2B and C2B where there are the most opportunities,” said Guy Moons, head of international solution consultants at FIS.
This is because it is important that the starting point for banks with RTP is them being able to capitalise on all of the investments that they need to do to bring this infrastructure to life, he said.
“We all know that in the P2P and retail space, capitalisation is very difficult for banks. Yet, with businesses and merchants included, there is a revenue stream associated with transactions,” he said
And more often, banks are getting into discussions about how to roll out this type of solution, he suggested. “Whereas six months ago, the questions were more high-level. Now, they are more concrete and geared towards solutions.”
SEPA RTP
On the standard-setting side, work is being carried out by the European Payments Council (EPC). The EPC published its Single European Payments Area (SEPA) RTP rulebook in November 2020.
The new SEPA RTP (SRTP) rulebook was published on November 30. It includes enhanced functionalities and is based on the comments received in response to the three-month public consultation on the proposed change requests relating to the first version of the SRTP scheme rulebook.
Changes to the SRTP scheme rulebook include enhanced functionalities, such as the possibility to populate an URL, the currency agnosticism principle and the request for payment guarantee.
The related implementation guidelines for the rulebook will be published by December 24, the EPC has confirmed.
Meanwhile, the effective date of this second release is set for June 1, 2022.
However, the obligation to ensure full access across the EU will become effective at a later date, to be determined and communicated in due course.
With SEPA RTP, the industry is now entering into a playing field where there will be more standardisation, more openness and more a streamlined approach across the EU, said Moons.
“There are already a lot of domestic initiatives,” said Moons, pointing out products such as Zoomit, an e-invoicing platform in Belgium.
As it stands, just 10 percent of SEPA credit transfers happen through instant payments, warned Petia Niederländer, payments and risk management director at Oesterreichische National Bank.
“I believe and hope that request to pay will deliver a further step towards improvements to services,” she said, adding that there are a few steps yet, but RTP could play a significant role.
Request To Pay In The UK
In the UK, RTP has been developed by Pay.UK, the scheme body responsible for the country's retail payment systems, having launched plans in May 2020.
However, people believe that a cultural barrier needs to be overcome for RTP to be a success.
For example, one of the key use cases for RTP is for regular payments, such as bill and invoice payments. One potential challenge to take up in the UK is the popular use of direct debits for these types of payments.
According to the Pay.UK-owned Bacs, 90 percent of UK consumers have at least one direct debit, with every adult consumer in the UK making on average 82 direct debits per year. It is also widely favoured by billers due to its low cost and payment certainty. Some billers even offer discounts for payments made by direct debit.
As such, although RTP offers specific potential benefits to both consumers and billers, payment habits can act as a strong inertia to potential change.
"Momentum is slowly building in the UK with two active providers enrolled,” Peter Cornforth, commercial director at Answer Pay, told VIXIO.
Many banks are securing budget now to ensure delivery in 2022, he said. “We remain excited that the UK will catch up with the Request to Pay revolution taking off around the world."
In particular, Cornforth stressed that RTP payments could solve the UK’s current fraud issues.
“The UK has a massive authorised push payment fraud problem which Request to Pay can help eradicate so the demand is there,” he said.
Although it is worth noting that as bill payments will be a key use case for RTP, most of these are currently made using direct debit. As such, these are pull payments not push payments and have a low rate of fraud.
RTP could nevertheless help reduce fraud from invoice-based payments, particularly B2B transactions, that are paid using Faster Payments.
The vast majority of push payment fraud (98 percent of cases) occurs across Faster Payments, not Bacs.
Cornforth says he is looking across the continent to look at how the UK can ensure it remains ahead.
“Given how visibly energetic European Payments Council is compared to Pay.UK, I do think there is an opportunity to look at the best way to implement Request to Pay in the UK,” he said.
