Is Request to Pay the new frontier of payments in Europe?

In a world where every tap, swipe, and click seems to enable the seamless transfer of funds, a new player has emerged on the payment scene.

Request to Pay traction in Europe

Poised to shake things up in Europe, Request to Pay (RTP) is a digital nudge, a polite yet firm reminder that it’s time to settle up, sent seamlessly from creditor to debtor – writes Frederic Barbaix, Head of Payments at RedCompass Labs.

But RTP is more than just another notification popping up on your phone. It’s set to revolutionize how we handle payments.

From person-to-person splits at your favourite restaurant to paying your utility bill and settling business invoices, RtP provides an excellent foundation for value-added services to consumers, merchants, billers, and corporates.

Could it be the new frontier of payments innovation in Europe?

From push to pull

At its core, RTP is a payment request from a payee to a payer. These requests are securely transmitted via email, mobile apps or notifications that are sent to an ERP (enterprise resource planning) system.

Upon receipt, the payer can review the payment request, deciding whether to accept, reject or modify it based on their circumstances.

If they accept, the payer will authorize the payment, either manually or through automated means.

The authorized payments are processed, transferring funds from the payer’s account to the payee’s account through designated payment networks or financial institutions.

Both the payer and the payee receive transaction confirmations, providing details such as payment status updates and transaction references.

RTP means payments are pulled (the payee initiates the payment) rather than pushed (the payer initiates the payment).

Instead of paying estimates, customers can settle the exact amount they owe on their bill and if they can’t afford to pay in full this month, they can pay a portion of the bill and let you know why.

It takes the guesswork out of collecting sums of money owed for both consumers and businesses and significantly improves forecasting and cash flow for everyone involved.

What else?

There are also several additional advantages of RTP such as:

Enhanced Security: The payer controls which payments are being made and when. Through this mechanism, the payer can define which payments can be automated and made frictionless, and which payments require formal authorisation. This allows payees to collect payments from clients who are not comfortable with the perceived loss of control associated with direct debit schemes.
Cost-efficient: The RTP payment method is often cheaper compared to traditional receivables methods. The mechanism allows for fully automated payment processing and invoice reconciliation, driving the operational cost for corporate treasurers down.
Time-component: RTP allows merchants to choose when a payment is made, making it possible to cover a variety of payment services (instant payments, Buy Now Pay Later, recurring payments, etc). These use cases cannot be effectively addressed using other methods that typically only allow for payments ‘here and now’.
Improved Data Insights: RTP transactions generate valuable data insights that PSPs can use to better understand consumer behaviour, spending patterns, and market trends. This data can inform product development, marketing strategies, and business decisions, enabling PSPs and their clients to tailor their offerings to meet customer needs more effectively.
Enhanced Customer Engagement: PSPs can strengthen their relationship with consumers and businesses. RTP provides a flexible and interactive payment solution that meets the evolving needs of customers, thereby fostering greater loyalty and engagement with the PSPs brand.
Compliance with Industry Standards and Ease of Integration: ISO 20022 allows merchants to easily integrate RTP into a digital customer journey. The data can be used to communicate invoices, ask for (automatic) consent and provide analytics. The standard dovetails excellently with electronic invoicing requirements, which are starting to become the norm throughout Europe.
Partnership Opportunities: PSPs can forge strategic partnerships with financial institutions, technology providers, and other stakeholders in the RTP ecosystem. Collaboration allows PSPs to expand their reach, drive adoption, and unlock new revenue streams.
Possibility to Upsell: PSPs can leverage the RTP data provided to propose other products and services (for example provision of credit line based upon outstanding RTP messages) to its customers.

Although it is theoretically possible to exclude banks from RTP schemes (via an Open Banking Request to Pay scheme), including them brings additional benefits, especially if more complex use cases (B2B invoicing or debt collection) are developed for which customer trust and frictionless payment processing are required.

Strategic partnerships with banks will also allow for faster market adoption as the solutions created around RTP can be immediately presented to their customer base.

Is Request to Pay the new frontier?

RTP is currently undergoing global adoption with schemes already being rolled out in Europe, the US, Australia and a variety of countries across Asia.

In Europe, RTP is not linked to an instant payment scheme which means it can be used within a variety of instant, batch, recurring and buy-now pay-later use cases.

It is already gaining traction with many major transaction banks which are piloting this year.

The most prominent example in Europe of the scheme in action is OmniBilling by NETS, the Danish PSP is used by more than 90% of households in the region.

In the US, RTP has been implemented as a value-added service by The Clearing House (TCH) leveraging real-time payments. TCH uses it to differentiate its real-time payment offering from FedNow.

Australia’s BPAY allows businesses to bill their customers online in bulk via their banking app. There are currently 60,000 businesses signed up.

While in India, UPI Collect has contributed to the high growth of instant payments in the country, which are now responsible for most transactions.

While we are still a way off from the mass adoption of RTP, it has immense potential to be an alternative to most of the current payment methods.

When implemented properly, it will define the value-added services that incorporate it and can only be restricted by the imagination of the payment service providers who use it.


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